Everplay Group (LSE:EVPL) — Half Year Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the Team seventeen 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 that's 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 will review all questions submitted today and publish responses where it is appropriate to do so, and these will be available via your Investor Meet company dashboard.

0:33 Before we begin, I would like to submit the following poll, and I would now like to hand you over to the executive management team from Team seventeen Group PLC. Debbie, good afternoon. Good afternoon. Thank you, Jake. Good afternoon, everybody, and thank you for joining us today. You are joined today by myself, who many of you know, and also Mark, our CFO, who you've also heard from previously. We also have Steve Bell alongside us, who will be taking over as Group CEO of the group in the new year as I join the board as a non exec. Steve will introduce himself during the presentation. But as ever, we will jump straight in, we have plenty of time for questions at the end. Next slide, please, Jake. Operational highlights.

1:20 H1. Strong revenue growth, significantly ahead of the market. Please don't get carried away. We have a H2 to deliver yet. Team seventeen, 15% year on year, up. Storytoys, 39% year on year, up. And finally, ASTRON, 109% year on year. We will go into more detail on each division during our presentation. M and A in the first half of the year, I should say also the growth in the first half of the year on that strong revenue was all at 100% organic. The only M and A that we did in the first half of the year was a company called Independent Arts over in Germany. They've been making video games for around thirty years. The reasons for this, it strengthens the development of Astragon's own simulation brands.

2:08 And more importantly, they gain an experienced partner to accelerate on a new simulation IP that they are working on. Growth in portfolio and diversity and licensing partners specifically. In H1, we extended and strengthened relationships with key license partners for StoryToys, including Mattel, Marvel Entertainment, Sesame Workshop, The LEGO Group, and The Walt Disney Company. Astrogon, we announced in March that they were also, doing third party publishing on as a label, specifically looking at the more casual simulation market, but also games that they feel they're passionate about that also make commercial sense.

2:53 Two new games will launch this year. One has already launched, and one will launch later on in h two, plus railway online, which we added last year. Team seventeen's games label portfolio continues to grow, now over 800 digital revenue lines, up 200 year on year. For anyone not aware, if a game is on four platforms, that is four digital revenue lines. If that game has pay as one piece of paid DLC across those four platforms, that equals a total of eight digital revenue lines. We are truly building one of the most diverse portfolios reaching the widest audience in gaming as a group. Our own IP across the group, we continue to strengthen and invest short, mid and long term in IP across the group from Worms, The Escapist, Golf With Your Friends, Hell Let Loose, to construction, police, fire and bus simulation.

3:54 These are all EVERPREEN IPs with a long life cycle. You will see more new IP from AstraGon in the coming years. There's two in development, and we'll announce at the right time. But also, we're ensuring we're not only supporting our IP that's in the market, but we're building future iterations for future years. And we look forward to sharing more of those with you over the coming years. Our people. Attrition rates group wide is 10.4%, significantly below our sector. We've seen a number of numbers, but it's the numbers that spring to mind are between 1522% in much of our sector. Updates on our recent engagement surveys, our games label. Overall engagement, 87.5%, up from 84% in the previous year.

4:42 95% proud to work on our games label. 95% would recommend as a place to work, up from 90% in the previous years. StoryToys ran their first engagement survey also. 82% engagement. 94% are proud to work for StoryToys, and 90% would recommend StoryToys as a place to work.

5:09 AstraGon have also completed their first engagement survey, and I can only assume our German friends take this to another level of seriousness. Engagement rate was 81%. 81% would recommend Astra Ghan as a great place to work. 81% are proud to say they work for Astra Ghan. The day we hit 90% in Germany, I'm viewing it as 100% compared with the rest of rest of the world. I say no. They have a phenomenal team spirit. And now let me hand over to Steve so he can introduce himself. Thanks, Debbie, and good afternoon, everybody. I'm conscious that I don't know most of you on the the call, so I thought it was worthwhile just introducing myself and, more importantly, talking about my background because I think that's really important as far as what I've learned over the last thirty years in the creative industry and what I can bring to the team seventeen group moving forward.

6:04 So prior to joining team seventeen, and I'm now two weeks into my my my time within the business, I was the founder and global CEO of an advertising agency called Iris. We used to do a lot of digital marketing, pure play advertising, CRM, and brand value campaigns. And we grew to about a thousand people with 14 different offices around the world, and that growth was driven partly by m and a. So I've got a really good understanding of the the world of m and a, how to acquire, and how to integrate those businesses within a portfolio business. We sold Iris in 2015 on a five year earn out to the Samsung Group, and I'd always planned to leave the business after the earn out had finished because I wanted to explore something else in my career. I wanted to do something else that I would find exciting outside of the world of marketing communications and advertising.

6:59 And as soon as the team seventeen opportunity came up, I literally jumped at the chance. What incredible business that's been run-in such an incredible way with a diverse set of offerings.

7:10 Some people have asked over the last week or two why I took the jump from marketing communications and advertising into computer games, and are there any parallels? And and the strange thing is I knew from the first time I met Debbie, there are such clear parallels between both industries even though the output is slightly different from maybe maybe a a ninety second TV ad or a website build to a computer game, the principles of the creative industries are both very, very similar. Understanding the target audience, delivering a compelling story, delivering high levels of engagement, understanding brand lifetime value. All those things, I think, are as important within computer games industry as there is within advertising and brand marketing. The other thing that I'd like to say is I'm I'm a quick learner, but but but it's fantastic news, the fact I've got a board with Debbie and also Frank who we're going to talk about later on, who are both icons of the gaming industry. And if there's anything that they don't know, it's probably not worth knowing.

8:11 So I can always draw on their experience to be able to help me along the journey, but I've got 3.5 of sitting alongside Debbie taking as much as I can from her between now and the end of the year. So So I'm truly

8:23 honored and truly excited to be working within the team seventeen group and adding huge value that I feel as though I can moving forward. Thank you, Steve. My final point on the h one highlights, and it might feel feel like a strange H1 highlight to add, but I thought it would be useful to share some of the insights, that we've seen in H1 as it really does make us all appreciate the breadth of our portfolio and diversity of that portfolio as well within the group. For many years, you've heard me talk about we are a portfolio business. Never has that been more true. 2023 is the best year to be a gamer and a player. It's an exceptional year for quality new releases. Games like our own drudge and other indies, games that I'd like to point out as well, games like Battlebit and Dave the Diver. Yes. That is really a game called that, if you aren't aware.

9:18 Breakthrough because of what they are doing different, not just as an indie game, but against the biggest games also. To put it simply, every month this year has been the equivalent of a q four release slate across gaming, and so it's such a great achievement. As an example, this week alone, we will see PAYDAY three, indie A plus titles such as Lies of Pee and Party Animals, alongside Warner Brothers relaunch of Mortal Kombat one. All great games launching within three days. There will also be no doubt hundreds of other titles from AA and Indus that are launching. That's ignoring the impact that games like Baldur's Gate is having on PC and PlayStation five and what Starfield is doing on PC and Xbox. As I said, a fantastic year to be a games player, but a highly competitive market this year.

10:06 Equally, continuing the continuing trend regarding discounting on new releases and back catalog, We talked about this in March. Last Christmas, we saw some of this. It's continued throughout the year so far and deeper than last Christmas. We have held our discounting very strongly in those promotional campaigns. H1 is a huge achievement and testament to the diverse portfolio we have in our group. On that note, Jake, could we move to the next slide and hand over to Mark, please?

10:37 Thanks, Debbie. Good afternoon, everyone. So Debbie's talked about some of the performances within the business. I'll just reiterate some of that in terms of the strong top line revenue growth, reaching GBP 70,000,000 in this first half, up 30% year on year. Across the group, we saw five new titles launched and then two existing titles added onto new platforms. And alongside that, we saw three new apps from StoryToys. In addition to to this on new releases, we saw over 30 DLC. So that's additional content, downloadable content put across the games label and Astragon. And then StoryToys team were very busy with over a 100 app updates to support post launch titles during the first half.

11:28 All of these help support the back catalog in in continued growth. So all three divisions showed significant top line growth equally, and Debbie's mentioned that. And it's through this that we've got generated a broader game genre and a wider customer base. I would say though, Ashtagon, I think, was the standout division within the group. And it's worth noting that they have a very tough comp for the second half against some q late q three and q four launches of all of their own IP last year. In total, the games label represents just under 70% of total revenues. Ashtrigon has lifted their share to be about 23% and Story Toys is smaller but growing as they all are at just under 10%.

12:17 Next slide please.

12:20 So a bit more detail on the portfolio. So although the overall sales mix has remained in line with the prior year with O and IP at 39%. But there's different mix within that across the divisions with some relative strength of Ashtragon given their performance in the first half. And third party now represents 61%. And that these two combine, of course, to give the overall revenue growth, top line growth up to 70,000,000. And there's some specific mentions really on some titles in own IP. You know, the two of the key titles from Ashtrigon are police simulator and construction simulator. And then titles from team seventeen digital include Hell Let Loose and Golf Your Friends. So as Debbie mentioned earlier, EVERPREENE titles, building franchises, and building the base for for long term growth.

13:12 I think the standout performer for the third party portfolio came from the games labels, eagerly anticipated dredge title as as Debbie mentioned earlier. That was released at the end of q one. But alongside that, there's a special mention for Japan two, which launched late in May. And and all of these were supported by the growing portfolio within our third party titles across games label and story toys. And we'll start to see contributions from Ashtagon's third party simulation label as mentioned by Debbie also as that grows with the three titles that she talked about. Those new release revenues that I mentioned make up over 20% of the total sales, and they came mostly from third party new releases.

14:01 That also included killer frequency, launching across the the group as as an owned IP title for team seventeen digital in h one. Debbie is gonna talk through each of the divisions in a little bit more detail, so you'll get a bit more background then. The group's broadening back catalog now contributes 80% of with a wider genre and and growing customer base, as I talked about, than ever before. And and it it continues to be the heart of our business. And this does now include a wide range of titles across the group, including Hell Let Lose, Policing Construction Simulator, The Overcooked franchises, The Golf With Your Friends, and also The Escapers franchise. But but also includes the edutainment apps from story toys, such as Disney Coloring World and Lego Duplo Disney.

14:50 Actually, nine out of our top 10 selling titles in the first half came from back catalog titles. And it's that, I think, overall breadth and diversity of the portfolio that continues to support the group's core business model with high quality titles and our focus on maximizing the value through their life cycle over many years. And I'll hand back to Debbie to walk through those individual divisions. Next slide, please. Thank you, Mark. So let's look at Team seventeen's games label in a little more detail. It's been a hugely busy period for us. So as ever, a huge thanks to our teams and our development partners around the world for all of their efforts. In terms of new releases and h one highlights, Dredge, our games label launched one of the indie darlings of the year. Our timing was perfect, and the game delivered something very unique for players in its space.

15:47 In many ways, it simply hadn't been done before in the way that Dredge was executed. It's exceptional, and Black Salt have delivered a best in class first out in on PC and console. The game what we refer to as snack size game took it taking, pending a player skill, twelve to twenty hours to complete on playthrough. It's a great title, but also one that even triple a gamers are playing in between their daily main course of triple a gaming. A beautiful game, and we are all very proud. Tropang two, a niche retro first person shooter, long awaited by hardcore fans. Tropang two delivered well, but it is a niche title that our sales team have managed very well. We also partnered up with our friends at New Blood Interactive, who have the number one game in this space, Ultrakill, to give players a great bundle opportunity with the two titles called UltraPang.

16:42 Why is that important? Week one, it had a 10% extra sales, and Lifetime will add a similar percentage more and is great for fans and players in that space. Killer Frequency made a solid start across platforms, including Oculus Rift. Playtime is in the top tier for 2023 release on Oculus, and user reviews are outstanding. And we have added a quality title to our portfolio and dipped our toes again in VR. We also launched Farmside and Summon Quest alongside Apple Arcade in the first half.

17:17 Given a highly competitive H1, we really doubled down on our marketing activity in the period and to support early H2 releases. We've worked hard alongside our development partners to get those titles ready for August releases, bringing two titles forward on average by one point five months as an example. The marketing spend is extraordinary, but this year is an extraordinary, highly competitive market, and that was a key part of our focus. In terms of our back catalog performance, over 800 digital revenue lines, as I've discussed in Team seventeen's games label. It's all about the diverse portfolio we offer. Despite the ongoing trend to discounts, we adopted a sensible approach.

18:02 A number of our FY 'twenty two releases have been discounted at peak promotions by a maximum of 20%, which given the market average is narrowed to 35% to 60% at times, we maintained top line revenues for Team seventeen's games label. As mentioned, over 80 800 digital revenue lines, so I won't go into individual titles, but pleased where we sit at the end of H1 with a very diverse portfolio. So overall, solid delivery, putting long term revenue for our partners and ourselves first across the Games label in H1. Finally, half two outlook. Dredge expect more DLC, free and paid is coming. Tropang two is launching on consoles, plus paid and free DLC will arrive in H2.

18:50 As mentioned earlier, our marketing efforts increased in h one on early h two releases designed to increase awareness and sales. As you would expect, some games perform better than others, but this is Team seventeen, and our portfolio model means we have more winners than losers. Moving out to partially derisked alongside our partners at PlayStation in the Plus subscription deal. Reviews are strong and user reviews above 80%. We have a good title that has joined our portfolio. Our sales team are one of the best at managing life cycle right. Yes. It's busy right now, but confidence is solid looking ahead. Gord launched very close to Boulder's Gate. Behind what we would like originally, ongoing work is happening.

19:36 User reviews are of particular attention for us. We have more DLC coming. I'm working very hard with the with the team to turn it around. Blasphemous two launch was very successful, launched during Gamescom, which was fabulous for the development team and our publishing teams to experience together in one place. User reviews, very positive, 93%. It's one of the Hindi hits of August and also seen a big uplift in the first game as well. It's a great game and launched very successful. Overall summary, we have lots to do in H2, but we believe we are in a solid place. Next slide, please, Jake.

20:18 Moving on to ASTRON, H1 and H2 outlook focus. What a great M and A ASTRON has been. It may have taken four years to find the right simulation company we wanted, but well worth it. Very proud of all and so much work was done in leisure to ensure these results that many of you don't see. H1,109% as we discussed. Astragon, in my opinion, are a year behind where Team seventeen's game was when we IPO ed in 2018. It's a fantastic business. And as much of you look forward to their progress in future years, so do I. That said, they do have, as Mark mentioned, a very tough H2 comparable after the launches last year. So let's keep our feet on the ground, but let's enjoy their journey with us so far.

21:04 H1 was all about own IP. PoliceSIM continued to excel across all platforms. User reviews, 84%, A brilliant game. Many of you know I'm a huge fan as a player. Group crossovers, check out the Bust and Bail app bundle, Escapist two, Police Simulator. If you own one of these games, you get notified to complete the bundle. Many millions of players in Escapist as an example. This is how we're working smarter together and sharing our knowledge across our group. Construction simulator. Recent news reviews now at 84% and very positive. This year in March saw the launch of the year one season pass, includes 21 new machines, new mission campaigns, cosmetic items and season one helmet. This is the start of building our astragon simulations as a proper service for the for the player base.

21:56 June saw the airfield expansion and September saw the SENI. And no doubt, my Midlands accent hasn't helped the pronunciations of that. So apologies if anybody in the q and a knows how to do it, I would welcome feedback. That pack includes 15 brand new machines. And yes, we are all becoming experts on construction brands globally. So much long term potential that I'm sure you will see with over 80 global license partners involved. Best in many of you will remember when we acquired this was a key IP, and the '21 version had been rushed out under its previous owners. Solid investment last year has seen season pass launch, gold edition launch, the school bus extension most recently. Importantly, the game was on mixed overall reviews below 50% at the time of acquisition.

22:46 Overall today, now sits at 70%, and the next up gold edition in h one has been a key part of that turnaround. Always work to do but heading in the right direction and shows our skill sets of doing this shared with Astra Gon alongside investment into their beloved franchises. H2 outlook. Firefighting Simulator will finally land on Switch this year. Overall, general reviews, user reviews are at 82%, very positive. New third party label titles will launch in H2. Abrisse, Build to Destroy launched earlier this month. User reviews are at 87%. How launches later this year also. It's the start of an exciting area, and we will share more next year. Continued planned DLC updates paid and free across police, bus, and construction sim also.

23:38 As per Team seventeen's games label, Astragon have closely managed their discounting all year on key titles, even 21 releases. Maximum so far is 30% in those key promotional opportunities. We also launched our first cross group physical game together with Blasphemous Toe. Overall, positive outlook, but cautious, as my German friends tell me daily. Jake, if we could do the next slide, please. StoryToys, H1 and H2 outlook focus. Again, what a great start for StoryToys, 39% up year on year. And I don't think any of you need to know what the mobile market looks like this year. It's not having the easiest of time. So an exceptional performance for StoryToys.

24:27 Personally, I take extra pride with StoryToys

24:30 as despite growth, it really is a mission based company close to my heart as we bring future generations into interactive worlds and help our children learn. H1, as per Team seventeen and AstraGhan, it's been busy, but more so for StoryToys. They didn't release a new app last year and three launched in h one. Again, lots of work last year strategically to broaden portfolio and partnerships to make this happen. Story toys apps, as we have shared historically, grow year on year, so most of the new releases we will talk about next year.

25:08 Back catalog and subscription. Year on year, very solid against the mobile market, as mentioned. Story toys are a highlight. Apps subscription grew circa 25% on average in h one.

25:22 Over 130 app updates were launched across the portfolio also. We launched Disney Coloring World into Apple Arcade in May with positive signs also. H2 outlook, solid road map of new content updates across all new releases and portfolio alongside seasonal updates.

25:43 Continued expansion of partners, story toys are in strong demand by global licensing partners. And as previously mentioned, we really will only partner with the biggest kids brands globally and are very, very selective. Next slide, please. And over to Mark.

26:03 Thanks, Debbie. Just going to go through the P and L and balance sheet. So gross profit grew to £30,000,000 in value terms, but we did see a fall in the gross margins. And that's linked to a number of factors really. Own IP mix was a factor with that strength in in Ashtrigon's performance taking up a larger share given their standout performance. They do have some royalty payments to their development partners that we say outsourced to. So it had an impact. And and those royalties are lower than than we pay on other third party development contracts with team seventeen, but they did have an impact overall bringing down slightly the the margin. And that was added also to the the performances on third party had a slightly different mix within it in terms of associated royalties.

26:51 So sales mix was a was a factor. Secondly, we had higher expense development costs. Just to point out, when we expense development cost, that's all costs post after the title's been launched and they're expensed rather than capitalized. And these increased across all divisions, which is a a point of, you know, supporting the broader back catalog. And you you heard the talk earlier about the numb you know, the amount of DLC content and updates that were pushed through the business. That's all about broadening and supporting that life cycle so that we can extend the value of of those titles over time. And finally, amortization charges were higher, but that was expected, and that's linked to

27:35 charging back all of the capitalized development costs over time on titles that were launched. Some of them late Q4 last year flowing through to this year with Ashtaban and the games label, but also the five titles that were launched earlier this year. So it's a timing factor as well as a sales mix factor on gross margins. In addition, we saw some increases to admin costs. We show admin costs here growing over the year, but they are significantly weighted towards the first half and driven by a few major factors. The the the primary one being marketing cost increases, both to the extent in the scale of the spend, but also in the timing given that we had earlier launch profile of new releases compared to the prior year. But but equally,

28:27 we promoted all of the launches for the second half in the early part of the year. So we saw a big spend on uplift on marketing costs in the first half. Four of those titles were all in for launches in the second half. So that significantly takes cost out of h two as there are far fewer launches to support across the group. And we expect to see those that weighting of marketing cost to be much lower in the second half. In addition, we had some the cost increases of the additional nearly 50 heads that were added in the second half of last year, and that was growing the headcount across all divisions. And again, that's about us, you know, continuing to invest in supporting the growing portfolio of titles and apps.

29:14 And to some extent in admin costs, we're also impacted by some general inflation in areas such as consultancy, audit and insurance, as well as a kind of there's a headwind on FX compared with the favorable tailwinds in the prior year. As a consequence of those factors influencing both gross margin and then also front loading of marketing spend and flow through investment people, This led to $1,700,000 reduction in adjusted EBITDA and associated drop in margins. But hopefully, you can see it's to do with waiting and phasing and timing and we've got plans of how that moves into the second half, which we'll talk about later. The resulting adjusted EPS and EPS measures are lower, but that's linked to those impacts already outlined.

30:03 But they also reflect an increase in shares in issue and we have some relative impact to tax rates group, which include also The UK tax rate from April earlier this year. Jake, next slide, please. So the main challenge change in the balance sheet on assets at the end of June was an increase in intangible assets. So that reflects the capitalized development costs with 18,000,000 capitalized in the first half. And that's driven by that ongoing investment across the group, not just in team seventeen now, but in Astragon developing their titles, their own IP titles for release over time. And and it's in a we're investing in a broader base of titles and apps, and then we release not just in the following year, but the next three to four years.

30:49 So we're a larger group now. And that that impact of Ashtigon with bigger projects as well as that broader timeline a broader investment portfolio does does drive up that investment, but they're investments for the future growth of our portfolio. Cash conversion slightly higher in the first half than last year, but that's linked to seasonal working capital movements predominantly in Ashagon's retail business between the end of the year and the Q1. Otherwise, working capital movements remain in line with trading and best in class for our sector. In terms of liabilities, the real movement here was just a swap from on contingent consideration or earn outs provisions from noncurrent to current, and that reflects the last remaining acquisition performance related payments on earn outs to hit this year.

31:41 The overall level reduced in line with the payments of 12,000,000 in the first half between last half last year. And that's those were made where the earn out criteria have been met. And that leaves a balance of just under 20,000,000 remaining current liabilities, which is the end of the the acquisition related earn outs from the deals we did over the last two years. Overall, the group remains highly cash generative. And even noting the outflow of those payments as mentioned and the acquisition of Independent Art Software, that leaves a healthy balance of 45,000,000 and a very clean, strong balance sheet that we're really proud of in the sector. So I'll come back to Debbie, please. So next slide. Thanks, Jake. Thank you, Mark. Reflection is really good, and often, we all need to take a minute to remind ourselves of what we have built together.

32:33 Portfolio model. And please indulge me here. In 2018, I said we are building a portfolio games business. How amazing does our portfolio look today compared to what it was in 2018? We truly have built something special, and I still believe we are at the start of our journey. Amazing portfolio of owned IP, their party working with the most amazing developers around the world, and licensed IP with story toys with the biggest kids' brands in the world. We invest in games. Continued investment in new releases on original IP and into new IP, which brings some of the most exciting for innovation, in my opinion, plus a phenomenal back catalog portfolio.

33:19 I've said often we are building very diverse portfolio for all ages. This is super key. It's not let's just do this. It's a mission and in our DNA. Stable growth engine. As a combined group, our knowledge and skill sets are very strong. Again, we have built unique. Shared developer platform and commercial partner knowledge capability. From those of you who remember my indie roofer in 2013 in Made The Escapist to help and support teams around the globe, it's our passion. Games and app acquisitions, new titles and franchises, building those franchises. We are experts at building franchises.

34:04 Our green light still signs less than 0.05% and is very selective. Commercial life cycle management know how. We are one of the best, in my opinion, in games and deliver significant value to our partners. Cost management expertise, balancing indie developers' resources with internal and external resources to ensure we bring strong value to our development partners. Selective M and A. You heard me mention four years to find AstraGon, and I can share three years for StoryToys. We were looking for a simulation label seriously for four years until we found the right one, and similar with StoryToys three years. We know what we want, and we know what great looks like.

34:50 We have strong cash generation, which underpins our M and A. We are in a great place regarding opportunities. However, we are very selective, and we have patience too. High volume of inbound M and A opportunities, plenty of that happening this year, but we're looking for great M and A. That's our priority, and it needs to be great. Our successful M and A track record is strong, maintaining that highly selective and disciplined approach, but we are in a very strong position going forwards. We've also strengthened our leadership team and our board this year. In 2018, the board was built for myself. I don't mind sharing. I was a novice who needed to learn the PLC world. So we have strengthened a board that helps and supports Steve as CEO from January 1.

35:41 We have a very strong board that covers all areas right now and equally from January 1. Frank Seignier, I'm delighted to welcome as chair designate right now, stepping up as chair from January 1. Peter Whipping is a nonexec and chair of our REMCO, bringing a huge amount of knowledge and skills that will benefit all. New senior group team members have been added as well at group level, people and culture director, operations and many other areas. We continue to bolster with key gaming, commercial and corporate experience. Next slide, please, and over to Mark. Thanks, Debbie. So as mentioned by Debbie in the earlier in the presentation as well, the games market continues to be highly competitive.

36:30 But the strong revenue performance for the group delivered in h one, the earlier new release profile on titles such as Moving Out two, Gord, Blasphemous two already launched, and a few remaining titles to launch than prior years helps derisk achieving our full year revenue expectations. Of course, adjusted EBITDA continues to be second half weighted as identified at the start of the year, but we do expect to see an improved margin as I talked about earlier due to the more favorable second half weighting of spend compared with a focus on disciplined cost controls across the expense development costs and those admin spend areas as I mentioned where we don't see some some of of those those costs repeated from h one. As such, we expect to deliver the full year results in line with current expectations.

37:21 So Debbie, think that concludes the presentation. We just go to the next slide, Jake, and we're into q and a, I think. Debbie, Steve, Mark, that's great. And thank you very much indeed for your presentation this afternoon. If I may just jump back in there. 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 were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Steve, Mark, Debbie, as you can see, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But Mark, if I may hand back to you just to share the Q and A with the team, and then I'll pick up from you at the end. Thank you.

38:09 Thanks, Jake. So we'll kick off with one. So with a strong balance sheet, softer share price, would you look to dividend or buybacks, or is m and a the way forward? I think the answer to that from our perspective is we are continually reviewing this with our board. We've decided in the past and the the currency current decisions remains that share buybacks or dividends are not the way forward for us at the moment. We continue to retain that strong balance sheet with cash. It puts us in a really strong position in the market, I think. And looking, as Debbie talked about, with careful due diligence at potential m and a opportunities that can grow the portfolio and grow and add to our business, you know, going forward. So at the moment, that m and a is the focus. We will continue to review that question on a regular basis with our board.

39:02 Debbie, there's one for you, I think. We talked about the broadening of license partnerships in StoryToys. Could you give a bit more color on to that what those are and any of the sort of ask for the structure of the deals, which we can't give, but a bit more color on what how they work for StoryToys? Yes. As Mark said, we obviously can't share deal structure terms. You can imagine we're working with some of the biggest companies in the world here. What I can say to you is long term agreements are in place. And I think Disney, we have renewed a number of times since launching, and we're a very highly valued partner. It's very difficult to comment really because we are under quite strict NDAs. But I would to give you reassurance, good long term partnerships.

39:49 StoryToys are the partner of choice for many of these people, as you know, and have been working with some for a long time and the new ones that have been added this year as well around long term. Thanks, Debbie. I'll pick up this question. It's about the team seventeen, eight hundred digital revenue lines, a bit more color on these, how they're spread, and, you know, trends. So to to give you some idea, we we have a very diverse portfolio within team seventeen. You know, we have small, medium, and large titles. So we've got it's true. We've got some titles that are larger than others. But what we've seen over the last four years, five years since IPO is a broadening and a depthening of that portfolio so that we there's no reliance on any one particular title.

40:41 As we mentioned, there are some franchise titles like Overcooked, The Escapist. We've added some other strengths to titles like Golf Your Friends and Hell Let Loose. But equally, there are the the portfolio is made up of multiple titles. There isn't recurring revenue in the sense of subscription, but but what we do see is titles grow in value over time. Sometimes we see year two and three revenues are greater than the launch year and that we expect through that life cycle management to continue to to see value from our titles over a long period of time. Debbie, I think headcount at over 400 people, where do we see this going in the future?

41:28 Is there enough depth in the business to cover to deliver on future growth and forecasts? Yeah. Good question. I think, first of all, let's remind ourselves what our group is. We are a games publisher. All three divisions publish content, and we are a content creator. That is what our business is. We have some quite a bit many internal resources that fall into services sector, and we also work with many outsourcing partners around the globe. What you probably haven't seen, and I don't know if you were on the call in March because we did share some of this in March. If you look back in 2018, 2019, our outsourcing spends were around $300,000 last year. At the end of last year, it was around $10,000,000 So there's been more and more of a shift out towards outsourcing as we grow and scale. And if it gives you confidence, it's our outsourcing partners that are working very closely with us as we scale as well. But very important to remind ourselves, we're a games publisher and a content creator. We don't wish to be a services company.

42:35 There's many great partners who do that far better than what we could around the world. Thank you, Debbie. There's one gross margin, which I think are covered on the slides. But just as a recap, I was asking about the impact in H1 and returning back to normalized levels. Yes, I think I covered we saw an impact in the first half with sales mix with the and then the expense development costs that we both expect to see return back towards normalized levels. So we do expect those gross margins to reverse backwards from what we saw in the first half along with the measures on admin costs and the fact that we had that very first half weighted costs in our marketing spend. Debbie, there's news about platform revenue for indie games being cut.

43:24 Is how is the situation now? I think this is pointing to subscription deals, I think. Yes. Look. I can only say so much. You know, we have a lot of confidentiality agreements with our partners. But what I would say is, we're in a kinda we're in a little bit of a different situation to many because even though many people look at Team seventeen's games label as an indie games label, it actually our games label owns quite a few IPs and has a number of third party IPs that are that are generating double AA revenues. And so they're not quite as India as some of our peers have. I think there is a very sensible approach in terms of how you forecast that revenue, but also how you look at the long term strategy of what's going off in subscription.

44:15 We take the sense of we know the value of our content. And if the deals aren't right, we don't do those deals. If they are right, we will do those deals. I think, you know, it really comes down to how people are layering that on. I can't speak for what deals other people get because, genuinely, I have some insight, but not a lot, a huge insight of what those deals are. But I think indie games in particular, I think what they bring to subscription programs is tremendous value. And in part, they're bringing those unique and innovative experiences that many of us will never see, or come across if you only play AAA games and AA games. So I see significant value, and I hope the platforms also take that viewpoint as well.

45:07 Thanks, Debbie. And I think just one last one question we got that is probably best for you to answer with your experience, having founded this games label about life cycle. So we've got a large number of titles. Do you ever phase games out? Do you make profit once they've been launched? And perhaps a little touch on that life cycle piece that you've helped create and and passionate about within the business. Yeah. Look. Life cycle management, you're right, Mark, is a huge passion of mine and has been for a long time. I come from a world, grown up in video games, where we only had a retail distribution. Digital distribution has transformed the games industry and also significantly helped games developers and publishers around the world as well because our games are always on sale. If you look at I can only give my point of view, but if you look at the best selling games right at the top and I include many of our franchises in that, they have a life cycle in excess of of ten years.

46:05 We're still selling the very first version of Worms that launched on PC is still on sale today, and that's over two decades ago. And what I look at is I think the truly good and great have got the ten plus year life cycle. I think good games are probably five to seven years. And I think even games that aren't tremendously successful, they have a digital life cycle. You know? And even some of our smaller titles that I look at, you know, they're still selling in year five, six, and seven. You know, we have ten year you know, most of our agreements are ten years, and we renew with most of our partners for a good reason. We bring extensive value, in my opinion, much more than many of our peers do in terms of maximizing the revenue that our development partners and ourselves can from our titles over the length of that life cycle.

46:59 I don't think we've ever phased a game out, if that helps. Thank you, Debbie. Jake, that's the end of the question. So I'll hand back to you to help us wrap up. Mark, Debbie, thank you very much indeed there for addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the platform. But, Debbie, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that'd be great. Thank you. Really appreciate it. I'd just like to say a huge thank you. As most of you know, I'm in my final few months before I move over onto the board. I promise I'm not going that far away.

47:53 I shared at the time, I genuinely want to go traveling with my elder with my son who's coming up to 15 over the next two years. I'd like to say a huge thank you for all the support that you've all given me over the last five and a half years, in particular, allowing me to be myself is very important. And I'd ask that you give that support to Steve going forward. He is equally, yes, the board have decided, but he's also my chosen person. And I wish all of you all the best. And as said, I will be on the board. I will be driving people crazy with games that I send into green light, no doubt, and I wish everybody all the best. Debbie, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations?

48:48 This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Team seventeen 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.