PRESS RELEASE

The Board of Directors of Digital Bros Group approves the Half Year Financial Report as at

December 31st, 2020 (first half of the financial year 2020 - 2021)

FIRST HALF RESULTS:

  • REVENUES AT82.4 MILLION (+ 21%)

  • 96% OF REVENUES REALIZED ON INTERNATIONAL MARKETS AND 85% ON DIGITAL MARKETPLACES

  • EBIT QUINTUPLED AT20 MILLION

  • NET PROFIT OF €16 MILLION

  • POSITIVE NET FINANCIAL POSITION OF14.4 MILLION

  • Consolidated Gross Revenues of €82.4 million, compared to67.9 million on December 31st, 2019 (+ 21.4%)

  • 96% of revenues realized on international markets and 85% on digital marketplaces

  • EBITDA at35.6 million, significantly increased compared to €10.2 million on December 31st, 2019

  • EBIT of20 million, compared to €4 million on December 31st, 2019

  • Profit before tax of €22.2 million, a significant increase compared to €3.7 million on December 31st, 2019

  • Net profit increased to16 million, compared to €1.9 million on December 31st, 2019

  • Positive net financial position of €14.4 million (€20 million excluding the IFRS 16 effect), increased by11.8 million compared to the end of the previous period

RESULTS FOR THE FIRST HALF OF FINANCIAL YEAR 2020-2021 (AT 31.12.2020)

Euro thousand

31.12.20

31.12.19

Change

Change %

Gross revenues

82,381

67,850

14,531

21.4%

Gross operating margin (EBITDA)

35,605

10,153

25,452

n.m.

Operating margin (EBIT)

19,916

4,049

15,867

n.m.

Profit / (loss) before tax

22,153

3,649

18,504

n.m.

Net profit / (loss)

15,850

1,938

13,912

n.m.

Milan, March 9th, 2021 - The Board of Directors of Digital Bros Group (DIB:MI), which is listed on the STAR segment of Borsa Italiana and operates in the videogames market, today approved the Half Year Financial Report for the period ended December 31st, 2020 (first half of the fiscal year from July 1st, 2020 to June 30th, 2021).

Digital Bros Group's key consolidated results for the first half of financial year 2020-2021, together with prior period comparatives, are as follows:

  • Consolidated gross revenues increased to82.4 million, compared to €67.9 million on December 31st, 2019

    (+21.4%);

  • EBITDA of €35.6 million, significantly increased compared to €10.2 million on December 31st, 2019;

  • EBIT of €20 million, significantly increased compared to €4 million on December 31st, 2019;

  • Profit before tax of €22.2 million, significantly increased compared to €3.7 million on December 31st, 2019;

  • Net profit increased to16 million, compared to €1.9 million on December 31st, 2019.

RESULTS BY OPERATING SEGMENT

Consolidated gross revenues amounted to €82.38 million, increased compared to the €67.85 million recorded in the first half of the previous year (+ 21.4%). Net revenue growth was +29.5% due to the increased portion of digital sales that do not require revenue adjustments in comparison to the traditional retail sales.

Digital revenues in the period were 85% of the consolidated total compared to the 48% achieved in the previous year, therefore the Group has not been materially affected by the shutdown of retail due to the spread of the COVID-19 pandemic.

International markets revenues were 96% of the total consolidated revenues in the period.

A breakdown by operating segment for the period ended December 31st, 2020 compared to the period ended December 31st, 2019 is provided below:

Euro thousand

Gross revenue

Net revenue

2021

2020

2021

2020

Premium Games

74,739

58,043

16,696

28.8%

73,496

53,221

38.1%

Free-to-Play

4,483

3,338

1,145

34.3%

4,483

3,338

34.3%

Italian Distribution

2,932

6,185

(3,253)

-52.6%

2,738

5,642

-51.5%

Other projects

227

284

(57)

-20.0%

227

284

-19.9%

Total gross revenues

82,381

67,850

14,531

21.4%

80,944

62,485

29.5%

Change

Change 20,275 1,145

(2,904)

(57) 18,459

The Premium Games operating segment represents 91% of the consolidated gross revenues and significantly increased the gross revenues of the period by €16.67 million and net revenues, up by €20.28 million, as a result of the sales of Death Stranding, the Steam version of Control, Ghostrunner but also the on-going performance of Assetto Corsa and PAYDAY2. Revenues from Other products, which represent the digital sales of products launched in previous years, showed a continuous growth by 16.3%.

The Free-to-Play operating segment showed a 34.3% increase, from €3.34 million to €4.48 million. Gems of War, a Free-to-Play video game launched by the Group more than five years ago and constantly updated and improved, is continuously outperforming quarter after quarter. This game became part of the Group's IP portfolio as a result of the acquisition of the Australian studio - Infinity Plus Two - in January 2021.

The Italian Distribution operating sector revenues decreased by 52.6% (from €6.19 million down to €2.93 million), impacted by the continuing decline retail distribution and accelerated by the effects of the COVID-19 pandemic.

Digital Bros Group's revenues and earnings by operating segments for the period are as follows:

Euro thousand

Premium

Games

Free-to-Play

Italian Distribution

Other Activities

Holding

Total

Gross revenues

74,739

4,483

2,932

227

0

82,381

EBITDA

36,666

1,976

(24)

(19)

(2,994)

35,605

EBIT

21,650

1,913

(103)

(64)

(3,480)

19,916

The EBITDA amounted to35.61 million corresponding to 43.2% of the gross consolidated revenues, considerably growing from the10.15 million realized in the previous year.

Amortization and depreciation increased by €10.26 million compared to December 31st, 2019 due to higher costs associated with the amortization of an incremental number of intellectual properties published by the Group.

The significant growth of the digital revenue portion in respect of total sales pushed the EBIT to quintuple, up to €20 million compared to €4 million as at December 31st, 2019. Digital sales, in fact, show better profitability rates due to the narrow value chain, less operational complexity and better payment conditions by customers. The EBIT stood at 24.2% of the consolidated gross revenues for the period.

The net financial income was positive for €2.2 million compared to the negative €0.4 million realized in the previous year.

Profit before tax for the period ended December 31st, 2020 amounted to €22.15 million, an increase of18.50 million compared to profit before tax of €3.65 million as at December 31st, 2019.

Net profit for the period amounted to €15.85 million compared to €1.94 million as at December 31st, 2019.

Net profit attributable to the shareholders of the Group was €15.89 million.

Basic profit per share and diluted profit per share were respectively €1.11 and €1.09 compared to the €0.14 profit per share as at December 31st, 2019.

NET FINANCIAL POSITION

The Net Financial Position amounted to €14.42 million, significantly increasing by €11.82 million compared to €2.6 million as at June 30th, 2020. Excluding the IFRS 16 effect, the Net Financial Position amounted to €20 million.

TREASURY SHARES

Pursuant to Art. 2428 paragraph 2.3 of the Italian Civil Code, it is hereby disclosed that at December 31st, 2020 Digital Bros S.p.A. did not hold any treasury shares, as no transactions have been performed in the period.

SIGNIFICANT EVENTS DURING THE PERIOD

On October 28th, 2020, the Shareholders' Meeting of Digital Bros Group approved the Financial Statements for the fiscal year 2019-2020, a dividend distribution of €0.15 per share and appointed the new Board of Directors and the new Board of Statutory Auditors for the three-year period 2021-2023 (until the approval of the Financial Statements for the fiscal year ending June 30th, 2023).

SUBSEQUENT EVENTS

  • On January 7th, 2021, the Group acquired 100% of Infinity Interactive Pty. and Infinity Interactive Two Pty, the Australian companies that own the intellectual property of the Puzzle Quest and Gems of War video games and are responsible for their development. The transaction was carried out through the subsidiary 505 Games Australia Pty., recently established by the Group. The total fixed consideration amounts to USD 4.5 million, inclusive of a profit scheme for the key employees. In addition to the fixed consideration, an earn-out scheme has been agreed on: the earn-out may range between 0% and 9% of the revenues generated by the products developed by subsidiaries over the next 48 months.

  • On February 11th, 2021 the Group announced the forthcoming worldwide publication of the video game Eiyuden Chronicle - Hundred Heroes on both personal computers and consoles. The release of the video game is scheduled for the financial year ending June 30th, 2023 and the Group expects to lifetime revenues in excess of € 30 million.

OUTLOOK

During the second half of the fiscal year the Premium segment will launch the videogame Control on Sony PlayStation 5 and Microsoft XboX S.

The Free-to-Play operating segment will market worldwide numerous new products starting from the third quarter with the launches of Pocket Pioneers and Puzzle Quest 3, while the new version of the video game Hawken will be available starting from the fourth quarter of the current fiscal year.

Driven by the continuous launch of new products together with the continuous sales of already released titles, revenues will continue to grow albeit at a lower rate than that seen in the previous fiscal year.

The performance above the expectations of the first half drove the operating margins (EBIT) to the same level of the entire previous fiscal year. The profit margins will persist in the second half, but in part affected by the increase of marketing costs to support the launch of new Free-to-Play products and by incremental personnel costs due to the Australian acquisition and a greater number of resources needed to manage increasing volumes and a growing number of internal development studios.

Following the global market's positive forecasts, the Group continues to reinvest much of the free cash flow generated in the acquisition and development of new intellectual properties and intends to keep high investment levels also in the future. As of December 31st, 2020, the Group is investing in 21 new intellectual properties for approximately €83 million, without considering the costs for internal studios currently developing new videogames.

The on-going investments together with future acquisitions of intellectual properties are expected to take the Group to an incremental level of revenues compared to the actual, starting 2024. Numerous new productions will be released, including the second version of Assetto Corsa, created by the internal studio Kunos Simulazioni, as well as several other intellectual properties that will be communicated close to their respective launch dates.

The Group will continue to monitor the effects deriving from the spread of the COVID-19 pandemic, adopting appropriate mitigation measures as necessary, and reporting to the market on any issues not already adequately considered.

ART. 154-BIS OF THE "TUF" (TESTO UNICO DELLA FINANZA)

As required by paragraph 2, Art. 154-bis of the "Testo Unico della Finanza", Digital Bros Group's financial reporting manager, Stefano Salbe, declares that the information contained in this press release corresponds to the Group's underlying documents, books and accounting records.

This press release is available on the websiteswww.digitalbros.com andwww.1info.it

DIGITAL BROS GROUP

Listed on the Star segment of Borsa Italiana, Digital Bros Group is a global company that has been operating since 1989 as a developer, publisher and distributor of videogames through its brand 505 Games. The Group distributes its contents on both retail and digital channels. Digital Bros Group is active around the world through its own direct operations in Italy, United States, UK, France, Spain, Germany, China, Japan and Australia with approximately 250 employees.

Contacts:

Digital Bros S.p.A. Stefano Salbe CFO

Ph. + 39 02 413031ir@digitalbros.com

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Digital Bros S.p.A. published this content on 09 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 March 2021 17:32:04 UTC.