sumo group plc
TRANSCRIPT
SUMO GROUP PLCFull Year Results 2020
© 2021 Sumo Group plc. All Rights Reserved.Registered in England No: 11071913Registered office: Unit 32 Jessops Riverside, Brightside Lane, Sheffield S9 2RX
• Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” inrespect of the Group’s operations, performance, prospects and/or financial condition.
• By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast.
• This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendationregarding the shares and other securities of the Company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser.
• Statements in this presentation reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this presentation shall be governed by English Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.
DISCLAIMER
FY20 results ahead of market expectations
INTRODUCTION
Slide 3
Very strong market backdrop
Continuing strong and resilient performance through COVID-19 pandemic
3-star accreditation in B’Heard Engagement survey
Acquisitions of:
• Lab42 (May 2020)
• Pipeworks (October 2020)
• PixelAnt (January 2021)
Launch of Secret Mode in March 2021
FY21 very positive outlook
Sumo Group plc
Key messages:
Growth in headcount to 1,043 at December 2020 up 277 from December 2019
Our people
Acquisitions
Secret Mode
Visibility of 2021 development fees
489
592
766
1043
415488
634
869Total heads
Direct heads
SUMO GROUP SINCE THE IPO
28.6
38.7
49
68.9
8.4 10.214.1 16.5
Number of people
Year end studios: 5 7 10 12 13 (March 2021)December 2018 December 2019 December 2020
Revenue (in £m)
Adjusted EBITDA (in £m)
Sumo Group plc
Slide 4
Revenue CAGR since 2017
Adjusted EBITDA CAGR since 2017
Organic revenue growth 2019 to 2020
>34%
>25%
24%
December 2017
Acquisitions:
.0
FEB MAR JUN JUL AUG SEP NOVJAN ‘20 APR OCTMAY DEC
OWN
-IP
CLIE
NT-
IP
ANNOUNCED
NOW WORKING ON MORE THAN 40 PROJECTS WITH 28 DIFFERENT CLIENTS OF WHICH EIGHT ANNOUNCED(UP FROM 21 PROJECTS WITH 12 DIFFERENT CLIENTS AT APRIL 2020)
THE YEAR IN LAUNCHES AND ANNOUNCEMENTS
Slide 5
Sumo Group plc
AWARD WINNING
Slide 6
Sumo Group plc
LONG TERM CONTRACTED REVENUESumo Digital
Slide 7
ContractedNear-Contracted
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
85% 60% 35%
2021 2022 2023
LONG TERM CONTRACTED REVENUE
Pipeworks
Slide 8
ContractedNear-Contracted
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
2021 2022 2023
50% 24% 11%
Working remotely • All studios have been working remotely for 12 months
Maintaining our culture
• Caring and homeschooling support• Over 8,000 care packages shipped to our people • Coffee mornings, Yoga evenings, quiz nights, movie nights, etc.• Mental health first aid support
Government support measures • Have not taken any and do not expect to do so
Return to the studios • Managed re-opening of studios with greater flexibility
COVID-19 UPDATE
Slide 9
Sumo Group plc
IMPACT OF COVID-19
Successful milestone deliveries: 7/7Successful milestone deliveries: 4/4Successful milestone deliveries: 7/7Successful milestone deliveries: 9/9
Successful milestone deliveries: 4/4
Slide 10
Operating effectively• Operational effectiveness maintained in all tracked projects whilst remote working
• Successfully delivered 279 milestones in 2020
• Project closure more challenging
Sumo Group plc
FINANCIAL HIGHLIGHTS
1. Adjusted gross profit is calculated as statutory gross profit adjusted for net investment in co-funded games expensed
2. Adjusted gross margin is now calculated as adjusted gross profit as a percentage of revenue and Video Games Tax Relief
3. Adjusted EBITDA is set out later in this presentation
4. Adjusted gross profit, adjusted gross margin and adjusted EBITDA are non-GAAP metrics used by management and are not an IFRS disclosure
5. Some figures in this presentation have been rounded to one decimal place
£68.9m+ 40.7%
Revenue
(FY19: £49.0m)
£31.7m+ 25.8%
Adjusted gross profit
(FY19: £25.2m)
41.8%
(FY19: 44.8%)
£12.7m
Cash flows from operating activities
(FY19: £16.3m)
£6.8m
Net cash
(Dec 19 £12.9m & Jun 20 £15.2m)
£16.5m+ 17.1%
Adjusted EBITDA
(FY19: £14.1m)
Utilisation (Group)
Development fee visibility
Sumo Digital: 85%Pipeworks: 50%
(FY19: Sumo Digital 73%)
Adjusted gross margin(New definition)
92.6%
(FY19: 95.8%)
Slide 11
Sumo Group plc
FY20 FY19 YoY growth
£m £mClient-IP
Development 55.4 31.3
Royalty 1.3 1.3
Own-IP
Development 9.9 16.0
Royalty 1.9 - Significant Own-IP Royalties
Game revenues 0.4 0.4
Total revenue 68.9 49.0 40.7%
Client-IP 82% 67%
Own-IP 18% 33%
Client-IP: Strong track record of creating high quality content for publishers and likely to continue to represent majority of revenue
Own-IP: Longer term monetisation opportunity and range of project sizes with larger projects entirely or mainly funded by publishers
Overall mix of Client-IP & Own-IP will vary depending on project mix and status during the financial period
REVENUESumo Group plc
Slide 12
STATUTORY AND ADJUSTED GROSS MARGIN
FY20 FY19£m £m
Revenue 68.9 49.0
VGTR 6.9 7.4
Revenue + VGTR 75.9 56.3
Statutory gross profit 31.5 23.9
Investment in co-funded games expensed 0.2 1.3
Adjusted gross profit 31.7 25.2
Statutory gross margin 45.7% 48.9%
Adjusted gross margin 41.8% 44.8%
Slide 13
Sumo Group plc
RoyaltiesNow incur costs to generate royalties so no longer exclude royalty income in Adjusted Gross Margin.
VGTRVGTR a proxy for revenue in UK – No equivalent in Oregon.
Pipeworks• Considered cost classification following
acquisition.• Tend to use more contractors.• Gross margin is lower than Sumo Digital.• Underlying gross profit per direct head at least
in line with Sumo Digital.
Underlying gross marginUnderlying Adjusted Gross Margin remains strong at 43.2% - after Snake Pass 2 and holiday pay accrual flagged at H1. 2.5 months of Pipeworks has 1% impact on gross margin.
ADJUSTED EBITDAFY20 FY19
£m £m
Statutory operating profit 1.3 7.5
Amortisation 2.1 0.8 £1.7m Pipeworks – expected to be £4.5m in 2021 and £4m in 2022
Depreciation 3.5 2.2
Share based payments 5.0 2.7
Investment in co-funded games expensed 0.2 1.3
Operating lease costs capitalised under IFRS 16 (1.5) (0.9)
Foreign currency derivative contracts (1.0) -
Exceptional items 4.1 0.5 Transaction fees
Fair value loss on contingent consideration 2.7 -
Adjusted EBITDA 16.5 14.1
Adjusted EBITDA margin 23.9% 28.7%
Slide 14
Sumo Group plc
Expect H2 weighting once more in 2021
CONSOLIDATED CASH FLOW STATEMENTY/e 31 December FY20
£mFY19£m
Operating profit 1.3 7.6
Depreciation 3.5 2.2
Amortisation 2.2 0.8
Fair value loss on contingent consideration 2.7 -
Share based payment charge 5.0 2.6
Movement in trade and other receivables (3.7) 1.8 FY19 contract unwind
Movement in trade and other payables 1.7 1.3
Net cash flow from operating activities 12.7 16.3
Net finance (costs) (0.3) (0.2)
Tax received / (paid) 0.6 (1.6)
Purchase of intangible assets (1.4) (0.8)
Capex (4.3) (3.3) Expect c£7.5m in 2021 including £2.5m at Pipeworks
Acquisitions (25.3) - Acquisition of Lab42 and Pipeworks
Net proceeds from issue of shares 13.1 - Placing in July 2020
Proceeds of borrowings 14.2 -
Repayment of borrowings (10.0) -
Outflow of financial debt – IFRS 16 (1.0) (1.0)
Net cash (outflow)/inflow (1.7) 9.4
Slide 15
Sumo Group plc
WORKING CAPITALJune 2019£m
December 2019£m
June 2020£m
December 2020 £m
Revenue in excess of billings
“Contract 1” 2.3 1.3 1.6 -
Other 3.3 6.9 4.8 9.2
Trade debtors 11.1 5.8 6.9 10.3
Work in progress 0.8 0.7 0.1 -
VGTR 10.0 5.7 6.5 7.4
Other 1.8 3.2 3.7 4.1
29.3 23.6 23.6 31.0
Trade creditors (6.3) (3.1) (2.3) (4.2)
Contract liabilities (0.8) (0.4) (0.5) (0.9)
IFRS 16 lease liabilities < 1 year (1.0) (0.8) (1.3) (1.4)
Other provisions (7.5) (9.9) (8.9) (14.5)
(15.6) (14.2) (13.0) (21.0)
Net working capital (exc. IFRS16 lease liability) 14.7 10.2 11.9 11.4
Net cash 4.3 12.9 15.2 6.8
Slide 16
Sumo Group plc
CONSOLIDATED BALANCE SHEETSDecember 2020 December 2019
£m £m
Goodwill and intangibles 102.2 24.0 Goodwill on acquisition of Pipeworks
PPE 20.6 11.7
Deferred tax asset (net) 0.3 2.5
Trade and other receivables 31.0 23.7
Cash 10.8 12.9
Trade and other payables (21.0) (14.2) Bonus provision and VGTR payable
Borrowings (4.0) - $5.5m debt in US
Corporation tax (payable) / receivable (0.4) 0.7
IFRS 16 lease liabilities > 1 year (12.3) (6.5)
Contingent consideration (31.3) - Pipeworks
Net assets 95.9 54.8
Slide 17
Sumo Group plc
CLIENT AND PROJECT CONCENTRATION
FY 17 FY 18 FY 19 FY 20A 1ST 2 PROJECTS 2ND 2 PROJECTS 3RD 5 PROJECTS
B 2ND 1 PROJECT
C 3RD 3 PROJECTS 1ST 3 PROJECTS 1ST 2 PROJECTS 2ND 3 PROJECTS
D 3RD 1 PROJECT
E 2ND 2 PROJECTS
F 3RD 3+ PROJECTS 1ST 3+ PROJECTS
6 PROJECTS58%
6 PROJECTS53%
7 PROJECTS64%
11 PROJECTS48%
3 clients each >10% 4 clients each >10% 4 clients each >10% 2 clients each >10%
CLIE
NT
FY20 includes Pipeworks post-acquisition
Slide 18
Sumo Group plc
Little Big Planet 3(Sony Interactive Entertainment)
FORZA HORIZON 4STEAM SKU(Microsoft)
HOOD(Focus Interactive)
LITTLE ORPHEUS(Sumo Own-IP)
Unannounced(2K)
Unannounced(Dapper Labs)
FOOTBALL MANAGER 21(Sports Interactive)
HUMAN FALL FLAT(Curve Digital) NEW-IP
WORK-FOR-HIRE(Sumo Insourcing)
Sackboy: A Big Adventure
(Sony Interactive Entertainment)
NEW-IP NEW-IP NEW-IP CO-DEVELOPMENT CO-DEVELOPMENT CO-DEVELOPMENT WORK-FOR-HIRE
WORK-FOR-HIRE(Sumo Insourcing)
Unannounced(2K) CO-DEVELOPMENT CO- DEVELOPMENT AAA FRANCHISE WORK-FOR-HIRE WORK-FOR-HIRE CO-DEVELOPMENT WORK-FOR-HIRE
Unannounced(2K) CO-DEVELOPMENT WORK-FOR-HIRE WORK-FOR-HIRE WORK-FOR-HIRE
NEW-IP WORK-FOR-HIRE
AAA FRANCHISE WORK-FOR-HIRE
AAA FRANCHISE
WORK-FOR-HIRE
ANNOUNCED UNANNOUNCED
Slide 19
LIVE PROJECTS (1 of 2)Sumo Group plc
• Responsibility for publishing Sumo IP: Spyder, Little Orpheus, Snake Pass, Dear Esther, Prominence Poker, Pass the Punch
• Commercial outlet for creative Own-IP games from within the group
• Opportunity to publish small games from indie developers
Rival Peak(Facebook)
Magic The Gathering -
Spellslingers(Wizards of the
Coast)
Prominence Poker
(Pipeworks Own-IP)
+ MULTIPLE UNANNOUNCED LIVE PROJECTS
Mortal Kombat 11 - DLC
(NetherRealm / WB Games)
Minecraft Earth (Microsoft)
Halo Infinite(XBOX Game
Studios)
Puzzle Combat
(Small Giant Games / Zynga)
Player Unknown’s
Battlegrounds(PUBG Corp)
Call of Duty: Black Ops Cold
War(Activision /
Treyarch)
+15 OTHER LIVE PROJECTS INCLUDING:
MULTIPLE AAA NEW-IPMULTIPLE AAA LICENSED IP
LIVE PROJECTS (2 of 2) ANNOUNCED UNANNOUNCED
Slide 20
Sumo Group plc
PEOPLE31 December
201930 June
202031 December
2020
Direct
Sumo Digital + Atomhawk 634 686 741
Pipeworks - - 128
Total 634 686 869
Indirect 132 146 174
Total headcount 766 832 1,043
• Acquisitions – Lab42 team of 29 and Pipeworks team of 134
Slide 21
Sumo Group plc
• Attrition rates – 9.26% in UK (2019: 8.59%), 8.34% in India (2019: 11.45%), and 9.17% for Group (2019: 9.21%)
• Utilisation – 95.7% in UK (2019: 96.9%), 79.3% in India (2019: 91.3%), and 92.6% for Group (2019: 95.8%)
• Enhanced and flexible benefits arrangements
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
PLC Board approval of approach &
structure
March 2020
Social element can have the greatest
impact
3-star accreditation in B’Heard
Engagement survey
Sumo Digital Academy update
First Streamlined Energy and Carbon
Report in 2020 Annual Reports and
Accounts
IT security progress towards ISO 27001
accreditation
Slide 22
Sumo Group plc
THE MARKET
£7bnin 2020
Sumo is well positioned to benefit from that increased demand
The UK games market is valued at
30% increase on 2019 figures
Slide 23
Sumo Group plc
Increased digital production
More platforms & delivery models
Backwards compatibility has resulted in smoothing of console life cycles
Increased demand for high-quality creative output
in 2020
The global games market was valued at
$174.9bn
in 2021
$196bn
Source: Ukie/Newzoo
STRATEGY AND THE NEXT 12 MONTHS
Slide 24
Sumo Group plc
More great games
• Client-IP• Own-IP• Secret Mode
Acquisitions
• Services• Geographies• Clients• Publishers
Continued organic growth
• New studios• Accelerated organic growth• Publishing
APPENDICES
Slide 25
FINANCIAL CALENDAR
Publication of Annual Reports and Accounts May 2021
Annual General Meeting June 2021
Announcement of half-year results September 2021
Financial Year End 31 December 2021
Slide 26
Appendices
THE TEAM
• Co-founded Sumo Digital in 2003
• Over 20 years of industry experience having previously been VP of Development at Infogrames
• 2015 recipient of the TIGA Most Outstanding Individual Award
• Led secondary buy-out with Perwyn in 2016
Carl Cavers Co-Founder & Chief Executive Officer
• Co-founded Sumo Digital in 2003
• Over 25 years of industry experience having previously been Head of Core Technology at Gremlin Interactive
• Previously Managing Director of Sumo Digital
• Appointed COO in April 2019
Paul PorterCo-Founder & Chief Operating Officer
• Big Four qualified chartered accountant with c.30 years post-qualified experience as Finance Director, Non Executive Director and Consultant. Previously worked in M&A with Rothschild
• Experience of PLC and Private Equity roles including as Group Finance Director of WYG plc and as Non Executive Director and Chair of the Audit Committee of Sweett Group plc
• Appointed CFO in 2017
David WiltonChief Financial Officer
Slide 27
Appendices
OUR COMPETITIVE ADVANTAGE
Enable us to offer flexible, end-to-end turnkey and co-development solutions for publishers and other developers.
SCALEMANAGEMENTSYSTEMS
TECHNOLOGYOUR PEOPLE:GAME DEVELOPMENT
AND CREATIVE SERVICES
Slide 28
Appendices
THE SUMO BUSINESS MODEL
£LONG-TERM CONTRACTS MILESTONE PAYMENTS
LOWER RISK CONTRACTING
MODEL
Deeply embedded with our clients due to knowledge of IP, or use of Sumo’s proprietary technology: often both!
Slide 29
Appendices
v
THE SUMO CORE DEVELOPMENT REVENUE MODELVisibility of development fees with upside from back-end royalties
Contracted Development Fees – Paid on a 4-6 week development cycle based on milestones
Royalties
Concept & Pre- Production Production and Finalisation Downloadable Content & Games as a Service
Sumo control production and delivery…
Illu
stra
tive
Pro
jec
t
… and share in upside on strategic projects
Revenue – Development Fees (LHS) Revenue – DLC (LHS) Revenue – Royalties (LHS)
100
200
300
400
500
600
700
800
900
1,000
Reve
nue
and
cost
pro
file
(£
’000
)
T10T0 T1 T2 T3 T4 T5 T6 T7 T8 T9 T11 T12 T13 T14 T15 T16 T17 T18 T19 T20 T21 T22 T23 T24 T25 T26 T27 T28 T29 T30 T31 T32 T33 T34 T35 T36 T37 T38 T39 T40 T41 T42 T43 T44 T45
Slide 30
Appendices
THREE TYPES OF CONTRACT
Contract type Game Development(Turn Key or Co-Dev)
Own-IP – Game revenues
Original concept creation developed in partnership with third party
Funding Publisher Sumo or third party Co-funded with or fully funded by partner
Control of IP Publisher Sumo Publisher(Sumo may retain legal ownership)
Payment model Milestones payments plus royalties as earned
Game sale revenues or guaranteed royalty (if developed by a third party)
Milestones and royalties
Accounting
Development fees recognised using estimate of contract margin & percentage of completion
Royalties earned subject to IFRS 15 recognition principles
Development costs expensed as incurred
Recognise revenue as earned or guaranteed royalties as contractual obligation triggered
Capitalise development costs as intangible asset with regular impairment reviews (IAS 38)
Development fees as for publisher funding
Sumo investment expensed as incurred
Slide 31
Appendices
ANALYSTS AND SHAREHOLDERS
Significant shareholders Number of shares % Holding
Perwyn Bidco (UK) II Limited 26,170,961 15.3%
Mount Emei Investment (Tencent) 15,000,000 8.8%
BlackRock Inc 14,395,963 8.4%
Directors & related holdings 11,725,597 6.8%
Lake Street Labs Topco, LLC 9,893,940 5.8%
Swedbank Robur Fonder AB 9,028,477 5.3%
Liontrust Investment Partners LLP 8,000,000 4.7%
Premier Miton 7,584,602 4.4%
Schroder Investment Management 6,500,000 3.8%
Total number of shares in issue 170,757,758
The analysts who have published research on Sumo:
The shareholders who own Sumo:
Ross Broadfoot Patrick O’Donnell
Bob Liao Benjamin May
James Lockyer Ken Rumph
Katie Cousins Andy Bryant
Steve Robertson Natasha Brilliant
Bridie Barrett Alasdair Young
Slide 32
Appendices
SHARE BASED PAYMENTS
Management incentive schemesFY18 FY19 FY20 FY21 FY22 FY23
Actual £m
Actual£m
Actual£m
Forecast£m
Forecast£m
Forecast£m
Nil cost options at or after IPO 0.8 0.4 - - - -
LTIP awards 2.1 2.2 4.9 2.3 0.9 0.4
Share Incentive Plan 0.1 0.1 0.1 0.1 0.0 -
Total 3.0 2.7 5.0 2.4 0.9 0.4
• FY20 reflects vesting percentage for 2018 – 2020 LTIP.• Cost includes IFRS2 charge and NI cost before deferred tax credit.• Existing LTIP awards only.
Slide 33
Appendices
THANK YOU
© 2021 Sumo Group plc. All Rights Reserved.Registered in England No: 11071913Registered office: Unit 32 Jessops Riverside, Brightside Lane, Sheffield S9 2RX