Digital Bros S p A : Corporate Overview – Maggio 2020

PRESENTATION MAY 2020

COVID-19 UPDATE

The world is currently undergoing a harrowing and unprecedented event: the COVID-19 pandemic. The health and well-being of our employees is our greatest priority.

The precautionary measures adopted by governments around the world, to contain the spread of the contagion, locked people in their houses and caused the shutdown of numerous retail stores and chains. The free time from work and school during these times significantly impacted the demand for home entertainment and increased the revenue stream coming from digital distribution improving the operating margins of the Group.

Digital Bros have monitored the evolution of the pandemic emergency since the beginning and has responded to the changing needs of its people in real time. We have been acting and will continue to act in the best interests of the community, following government authorities' guidelines. We have asked to most of our employees to work from home to limit the spread of the Covid-19 and we have implemented all prevention and protection measures to guarantee safety of our organization and continuity of the business.

OUR MILESTONES

1989	2000	2007	2013	2015	2017	2020
FOUNDATION	LISTING	RETAIL	MOBILE	MOBILE AND CONSOLE	LAUNCH OF
		PUBLISHING	PUBLISHING	DEVELOPERS ACQUISITION	BRAND NEW IP

M O B I L E

3

WEDEVELOP,PUBLISHANDMARKET MULTICHANNEL VIDEOGAMES

STUDIOS PUBLISHING DISTRIBUTION

DR Studios	IP scouting and selection	Retail Distribution
Kunos Simulazioni	Production Survey	(Chains and Stores -
Global Distribution
Avantgarden	Marketing & PR
Network)
		Sales and Promotions
	Avantgarden
	Customer Support

6

MARKET STRUCTURE

DEVELOPERS	PUBLISHERS	CONSOLE	DISTRIBUTORS	RETAILERS	END
MANUFACTURERS	CONSUMERS

RETAIL

DEVELOPERS	PUBLISHERS	CONSOLE	END
MARKETPLACES	CONSUMERS

DIGITAL

MAY 2020	5

DIGITAL CHANNELS DRIVING GROWTH AND MARGINS

FROM TRADITIONAL RETAIL DISTRIBUTION TODIGITAL, MOBILE &STREAMING

GAAS (GAME AS A SERVICE)

GAME AS A SERVICE IS A COMMUNITY GAME THAT RETAINS GAMERS THROUGH THE CONTINUOUS DELIVERY OF ADDITIONAL CONTENTS

MULTICHANNEL	MOBILE & SOCIAL
GAMERS NOW ACCESS	WITH THE EXPLOSION IN
CONTENT ACROSS THE WEB	MOBILE DEVICES
THROUGH ALL AVAILABLE	EVERYONE IS NOW A
DIGITAL CHANNELS	GAMER, THE SIZE OF THE
INCLUDING CONSOLES,	MARKET OPPORTUNITY IN
SMARTPHONES, TABLETS	SOCIAL AND MOBILE
AND STREAMING	GAMING HAS INCREASED
	EXPONENTIALLY

MAY 2020	6

MARKET SIZE

THE WORLDWIDE GAMES MARKET WILL REACH $200.8 BILLION BY 2023

+8.3%

$200,80 Bn

$187,80 Bn

$174,20 Bn

$159,30 Bn

$145,70 Bn

TOTAL MARKETCAGR

2019-2023

2019 2020 2021 2022 2023

SOURCE: NEWZOO MAY 2020

MAY 2020	7

PRODUCTS

PREMIUMAND FREETOPLAY

PREMIUMGAMES

• Internal development/acquisition of contents rights from developers (IP ownership,long term agreements)
• Distribution of the videogames through traditional international sales network and digital marketplaces (Steam, Sony Playstation Network, Microsoft Xbox Live and Epic Games Store)

FREETOPLAY

• Internal development and publishing of videogames available for free on the main digital marketplaces (console, mobile and social platforms);
• In App purchases are the main revenue stream
• Continuous development and improvements after the launch to maintain stickiness

8

CHANNELS

DIGITALANDRETAIL

REVENUES TREND RETAIL VS DIGITAL

DIGITAL

RETAIL

DISTRIBUTION

DISTRIBUTION

Online Marketplaces:

Main Chains & Stores

Steam

E-commerce

Playstation Network

XboxLive

Epic GamesStore

69%

72%

60%

Game App Download:

49%

40%

42%

47%

Mobile And Tablet

14%

Stores

2%

FY

FY

FY

FY

FY

FY

FY

FY

FY

Online Social

11/12

12/13

13/14

14/15

15/16

16/17

17/18

18/19

19/20*

Platforms:

Digital

Retail

Main Social Networks

* Q4 FY19/20 - Digital Revenue expected to be 81% of total revenue (fiscal year closes on June 30)

MAY 2020	9

CONSOLIDATED P&L - Q3 FY19/20 YTD

Euro million	31.03.20	31.03.19	Change	Change %
Gross revenue	99.1	42.6	56.5	132.7%
Gross operating margin (EBITDA)	20.6	(1.6)	22.2	n.m.
Operating margin (EBIT)	10.2	(7.6)	17.8	n.m.
Profit/(loss) before tax	9.9	(7.5)	17.4	n.m.
Net profit/(loss)	6.4	(5.9)	12.3	n.m.
Recurring profit	7.8	(5.9)	13.7	n.m.
FISICAL YEAR ENDING 30TH JUNE			SOURCE: DIGITAL BROS

SIGNIFICANT REVENUE GROWTH INTHEFIRSTNINE MONTHSAND IMPROVEMENT OF ALLFINANCIAL MARGINS FUELED BY NEWVIDEOGAMERELEASES:BLOODSTAINED (Q4 FY18/19),CONTROL (Q1FY19/20),INDIVISIBLE (Q2FY19/20),JOURNEYTOTHE SAVAGEPLANET(Q3FY19/20)

COVID-19PANDEMICINCREASEDREVENUESFROMDIGITALDISTRIBUTIONIMPROVINGTHEOPERATINGMARGINS

MAY 2020 - FINANCIALS

11

GLOBALIZATION

	100%
	90%	16%
		33%
REVENUES TREND
ITALY VS INTERNATIONAL	80%
	70%
				62%
	60%							79%
					80%
Italy
50%					82%			82%	93%
International	40%	84%					86%
	30%		67%
	20%			38%
	10%				20%	18%		21%
					14%		18%
	0%									7%
		07/08	09/10	13/14	14/15	15/16	16/17	17/18	18/19	19/20
		ACT	ACT	ACT	ACT	ACT	ACT	ACT	ACT	ACT + FORE

MAY 2020 - FINANCIALS

12

REVENUEBREAKDOWN BY SEGMENT

CONSOLIDATED FY 18/19	CONSOLIDATED Q3 YTD ACTUAL
	+ FY19/20 FORECAST
Premium Games	Premium Games
71.2%	88,8%
ItalianDistribution	ItalianDistribution
20.3%	6,5%
Free to Play	Free to Play
7.6%	5,2%
Other Projects	Other Projects
0.9%	0.5%

MAY 2020 - FINANCIALS

13

PREMIUM GAMES - Q3 FY19/20 YTD

Euro million	31.12.19	31.12.18	Change	Change %
Gross revenue	86.8	25.7	61.0	n.m.
Net revenue	81.3	24.3	57.0	n.m.
Gross operating margin (EBITDA)	24.8	1.6	23.2	n.m.
Operating margin (EBIT)	16.6	(2.1)	18.7	n.m.
FISICAL YEAR ENDING 30TH JUNE			SOURCE: DIGITAL BROS

PREMIUM GAMES ACCOUNTED FOR 87% OF TOTAL REVENUES

MAY 2020 - FINANCIALS

14

REVENUE BY BRAND - Q3 FY19/20 YTD

Euro million	31.03.20	% on total
Control	30.0	34.6%
Journey to the Savage Planet	10.9	12.6%
Bloodstained	9.9	11.4%
Terraria	9.7	11.2%
Assetto Corsa	6.1	7.0%
Indivisible	4.0	4.7%
PAYDAY 2	3.1	3.6%
Other Products	7.0	8.1%
Retail Products	5.9	6.8%
Premium Games	86.8	100.0%
FISICAL YEAR ENDING 30TH JUNE	SOURCE: DIGITAL BROS

MAY 2020 - FINANCIALS

15

FREE TO PLAY - Q3 FY19/20 YTD

Euro million	31.03.20	31.03.19	Change	Change %
Gross revenue	5.1	4.8	0.4	7.6%
Net revenue	5.1	4.8	0.4	7.6%
Gross operating margin (EBITDA)	1.2	1.4	(0.2)	-14.2%
Operating margin (EBIT)	(0.08)	(0.3)	231	73.8%
FISICAL YEAR ENDING 30TH JUNE			SOURCE: DIGITAL BROS

REVENUESGROWTH BY 7.6% THANKS TO THE POSITVE PERFORMANCE OF GEMS OF WAR

FOUR NEW VIDEOGAME RELEASES IN NEXT FISCAL YEAR

MAY 2020 - FINANCIALS

16

NET FINANCIAL POSITION OVER THE LAST YEARS

		*
	(70,00)	70
	(60,00)	60
	(50,00)	50
FINANCIALNET POSITION	(40,00)	40
(30,00)	30
	(20,00)	20
	(10,00)	10

-

0

10,00										-10
20,00										-20
	FY12	FY13	FY14	FY15	FY16	FY17	FY18	FY19	H1 Q3 Outlook

* ADVANCES PAID FOR IPs AND LICENSES + TANGIBLE AND INTAGIBLE ASSETS

INVESTMENTS °

MAY 2020 - FINANCIALS

17

STARBREEZE AB INVESTMENT

SUCCESSFUL PROTECTION OF INTEREST IN PAYDAY

• Starbreeze AB (SB) is a Swedish videogame developer and publisher owner of the famous PAYDAY IP that successfully exited a reconstruction period on 6th December 2019.
• Digital Bros is a major stakeholder of Starbreeze (shareholding in the Company, earn out of USD 40m on PAYDAY 3, PAYDAY 2 console publishing rights and US USD 4.8m credit on the advance payments).
• To protect its stake in SB, especially its interest in the PAYDAY IP,
  Digital Bros has several steps leading to the Group holding 10.05% of Starbreeze AB's share capital and 24.44% of the voting rights;
• The transactions included the acquisition of all Starbreeze assets held by Smilegate Holdings for €19.2 m. The overall assets nominal value is €35.3 m (including a convertible bond of €19.7m, credit of approx. €14.8m, as well as shares)

,

MAY 2020 - FINANCIALS

18

OUTLOOK

• REVENUES GROWTH AT THE END OF THE FISCAL YEAR
• EXPECTED IMPROVEMENT OF FINANCIAL MARGINS RESULTING FROM INCREASED DIGITAL SALES
• LAUNCH OF ASSETTO CORSA COMPETIZIONE CONSOLE VERSIONS AND NINTENDO SWITCH VERSIONS OF INDIVISIBLE AND JOURNEY TO THE SAVAGE PLANET IN Q4
• DEATH STRANDING PC LAUNCH Q1 FISCAL YEAR 2020/21 - JULY 14, 2020 (LIFETIME REVENUE
  FORECASTED IN EXCESS OF €50 MILLION)
• POSITIVE NET FINANCIAL POSITION AT THE END OF THE FISCAL YEAR (GROSS OF THE IFRS 16 EFFECT)

MAY 2020 - FINANCIALS

19

2IPPORTFOLIO

WHAT HAPPENED IN RECENT YEARS

Our successful products generated cash

To invest for growth

We entered into the largest investment plan through strategic acquisitions and brand- new publishing deals

MAY 2020 - IP PORTFOLIO

21

IP PORTFOLIO

MAY 2020

LONG TERM	THIRD
AGREEMENTS	PARTY PARTNERSHIPS

OWNEDIP

22

LARGE QUALITY IP PORTFOLIO

Metacritic's #1 Publisher of the Year

		Scored	Distinct	Average	Metascore	Points
		Products	Titles	Metascore	Distribution
		5	8	80.0		306.7
		17	8	79.9		301.4
		24	24	80		299.2
		10	7	77.8		296.8
		24	13	79.1		291.1

BAFTA Nominations

11 out of 11 nomination

11 out of 11 nomination

23

SIGNIFICANT RELEASES BY FISCAL YEAR

PREMIUM AND FREE TO PLAY

PREMIUM DIGITAL &RETAIL

FY18/19		FY19/20	* Console	FY20/21

Puzzle

TBA 1

TBA 2

TBA 3

Quest I1I

FREE TOPLAY CONSOLE AND MOBILE

MAY 2020 - IP PORTFOLIO

24

CONTROL

• CINEMATIC THIRD PERSON ACTION GAME BUILT ON REMEDY'S PROPRIETARY NORTHLIGHT®
  TECHNOLOGY
• DEVELOPED BY REMEDY ENTERTAINMENT, DEVELOPER OF AAA VIDEO GAMES (MAX PAYNE, ALAN WAKE AND QUANTUM BREAK)
• WORLDWIDE PUBLISHING RIGHTS ON PC, PS4 AND XBOX ONE
• PUBLISHING PARTNERSHIP WITH EPIC GAMES
• DLCs LAUNCH PROGRAM (First DLC released on March 26th, 2020)
• HIGH METACRITIC SCORE (AVG. 83)
• EURO 39.5 MILLION LTD REVENUES

WORLDWIDE LAUNCH ON 27TH AUGUST 2019

STEAM LAUNCH IN AUGUST 2020

MAY 2020 - IP PORTFOLIO

25

BLOODSTAINED

• LATEST CREATION OF KOJI IGARASHI, THE FORMER SERIES PRODUCER OF THE CASTELVANIA FRANCHISE
• THE GAME IS AVAILABLE FOR PS4, XBOX ONE, PC WINDOWS, LINUX AND OSX
• HIGH METACRITIC SCORE (AVG. ABOVE 83)
• EURO 23.8 MILLION LTD REVENUES
• EXPECTED LIFETIME REVENUES OF AT LEAST EURO 30 MILLION
• SECOND VERSION ALREADY UNDER DISCUSSION

RELEASED ON JUNE 2019

MAY 2020 - IP PORTFOLIO

26

JOURNEY TO THE SAVAGE PLANET

• FIRST-PERSONADVENTURE GAME SET IN A BRIGHT AND COLORFUL ALIEN WORLD
• DEBUT TITLE FROM INDUSTRY VETERANS ALEX HUTCHINSON, YASSINE RIAHI AND REID SCHNEIDER'S NEW MONTREAL-BASED DEVELOPMENT STUDIO, TYPHOON STUDIOS (ACQUIRED BY GOOGLE DEC 2019)
• WORLDWIDE PUBLISHING RIGHTS ON PC, PS4 & XBOX ONE AND NINTENDO SWITCH
• PUBLISHING PARTNERSHIP WITH EPIC GAMES
• HIGH METACRIT SCORE (AVG. ABOVE 75)
• EURO 10.9 MILLION LTD REVENUES

RELEASED ON JANUARY 28, 2020

MAY 2020 - IP PORTFOLIO

27

ASSETTO CORSA

• ASSETTO CORSA IS THE #1 RACING SIMULATOR - 6.9 MILLION COPIES SOLD AND MORE THAN EURO 42.2 MILLION REVENUES
• NEW EPISODE ASSETTO CORSA COMPETIZIONE: OFFICIAL GAME OF THE BLANCPAIN GT SERIES (3 YEARS PARTNERSHIP)
• FULLY LICENSED GT CARS FROM TOP MANUFACTURERS: FERRARI, LAMBORGHINI, MCLAREN UNIQUE SELLING POINTS OF THE GAME:
• • Extraordinary level of simulation quality
  • Outstanding level of details with circuit laser scan technology
  • New unreal engine 4
• MOBILE VERSION UNDER DEVELOPMENT

CONSOLE VERSIONS RELEASE

JUNE 2020

MAY 2020 - IP PORTFOLIO	28

DEATH STRANDING

• GROUNDBREAKING EXPERIENCE FROM LEGENDARY GAME CREATOR HIDEO KOJIMA
• CONSOLE VERSION PUBLISHED BY SONY INTERACTIVE ENTERTAINMENT
• • Released on November 8,2019
  • High Metacritic Score: avg. 83
• WORLDWIDE PUBLISHING RIGHTS ON PC FOR DIGITAL BROS
• EXPECTED LIFETIME REVENUE FROM THE PC VERSION OF THE VIDEOGAME IN EXCESS OF EURO 50 MILLION

RELEASE

ON JULY 14, 2020

MAY 2020 - IP PORTFOLIO

29

HAWKEN

• MECH GENRE: COLLECT, BUILD AND CUSTOMIZE YOUR MECH
• STRONG F2P SYSTEM WITH PVE ELEMENTS
• LARGE POPULATION OF GAMERS
• THE ACTUAL PRODUCTION IS NOT JUST A SEQUEL:
• • New game design
  • Objective-basedPVE to maximize revenues without being 'pay-to-win' & to create sustainable long-term product growth
  • Enhanced mech customization system for deeper monetization streams
  • Mech differentiation to enhanceKPIs

RELEASE INQ2 FY2020/2021

MAY 2020 - IP PORTFOLIO

30

DIGITAL BROS - A SNAPSHOT

• GLOBAL COMPANY, OPERATING ACROSS THE VIDEOGAME MARKET
• DEVEOLPMENT, PUBLISHING AND MARKETING MULTICHANNEL VIDEOGAMES
• COMBINING PREMIUM GAMES AND FREE TO PLAY TO MAXIMIZE THE BRAND PROFITABILITY
• ACQUISITION OF UNDERPERFORMING INTELLECTUAL PROPERTIES (I.E. ASSETTO CORSA) TO BE EXPLOITED AND TO MANAGE RISK ACROSS MULTIPLE PLATFORMS
• FLEXIBLE APPROACH ON CONTENT ACQUISITION: IP ACQUISITION, LONG-TERMCO-PUBLISHING, LICENSING IN THE FAR EAST, CROWDFUNDING
• STRONG LAUNCH PLAN OF NEW VIDEOGAMES: ASSETTO CORSA COMPETIZIONE, BLOODSTAINED, CONTROL, INDIVISIBLE, JOURNEY TO THE SAVAGE PLANEY
• HISTORY OF STRONG FREE CASHFLOW GENERATION THROUGHT THE CYCLE

MAY 2020 - IP PORTFOLIO

31

• APPENDIX

29

WORLDWIDEPRESENCE

HEADQUARTERS: MILAN

216 PEOLE WORLDWIDE

MAY 2020 - APPENDIX	33

CLOUD & STREAMING: THE FUTURE OF GAMING

CLOUD GAMING
Videogames can be played on any device without	advantages:		mobility		constant upgrades
owning a specific hardware and with no local/			ubiquity		noexpensive
physical copy of the game itself. Videogames are
				hardware
streamed from the cloud on demand.
		instant play
MAIN STREAMING GAMESERVICES

Google STADIA (available)

Apple Arcade (available)

Microsoft GamePass

(available)

Sony PlayStation Now (available)

SERVICE

Streaming

Digital download (possibly with streaming for specificcontents)

Digital download

Streaming

DEVICES AVAILABLE

PC, mobile, Smart TV and Consoles

Apple devices only (Mac, Apple TV, iPad, iPhones)

Xbox One and PC (Windows10)

Likely to expand to others

PlayStation 4 and PC

MODEL

Subscription

-Pro: 9.99€ per month + single game purchase

-Base: free + single game purchase

Subscription 4.99€ per month

Subscription 9.99€ per month

Subscription. 14.99€ permonth

,

MAY 2020 - APPENDIX

34

WHO ARE OUR COMPETITORS

RETAIL		DIGITAL		F2P		DEVELOPMENT		FAR EAST
PUBLISHING		PUBLISHING

FOCUS HOMEINTERACTIVE

FRONTIER

GLUMOBILE

PARADOX

STARBREEZEAB

THQNORDICAB

TEAM17

BIG BENGROUP

DIGITALBROS

S O U R C E : D I G I TAL B R O S

	,
MAY 2020 - APPENDIX	35

ITALIAN DISTRIBUTION - Q3 FY19/20 YTD

Euro million	31.03.20	31.03.19	Change	Change %
Gross revenue	6.8	11.7	(4.9)	-41.7%
Net revenue	6.3	10.3	(4.0)	-38.7%
Gross operating margin (EBITDA)	(1.2)	0.1	(1.3)	n.m.
Operating margin (EBIT)	(1.3)	(0.2)	(1.1)	n.m.
F I S ICA L YEAR ENDING 30TH JUNE				SOURCE: DIGITAL BROS

DECREASE IN REVENUE FROM RETAIL VIDEO GAMES DISTRIBUTION (-41.7%),

EFFECT OF THE RETAIL BUSINESS CLOSURE CAUSED BY COVID-19

MAY 2020 - APPENDIX	36

OTHER ACTIVITIES - Q3 FY19/20 YTD

Euro million	31.03.20	31.03.19	Change	Change %
Gross revenue	0.5	0.4	0.1	10.4%
Net revenue	0.5	0.4	0.1	10.4%
Gross operating margin (EBITDA)	0.0	(0.2)	0.3	n.m.
Operating margin (EBIT)	0.1	(0.3)	0.2	82.5%
F I S ICA L YEAR ENDING 30TH JUNE				SOURCE: DIGITAL BROS

DIGITAL BROS GAME ACADEMY REVENUE

MAY 2020 - APPENDIX	37

INDIVISIBLE

• CLASSICALLY-INFLUENCEDRPG AND PLATFORMER HYBRID CREATED BY LAB ZERO GAMES (DEVELOPER OF SKULLGIRLS)
• CROWDFUNDED ON INDIGOGO IN 2015 (MORE THAN US $2 MILLION RAISED) UNIQUE SELLING POINTS OF THE GAME:
• • Mix of RPG action and platform
  • Huge character roster
• WORLDWIDE PUBLISHING RIGHTS ON PC, PLAYSTATION 4, XBOX ONE AND NINTENDO SWITCH
• HIGH METACRITIC SCORE (AVG. ABOVE 80)
• EURO 4.1 MILLION REVENUES LTD

RELEASED ONOCTOBER 8,2019

MAY 2020 - APPENDIX

38

Digital Bros S.p.a. Via Tortona, 37

20144 Milano, Italia www.digitalbros.com