|19. Team 17/ TM17 Buy @ 706p MV: £919m Employees: n/a Next figures: 10 September 2020 Times recommended: 2 Price when first recommended: 570p
“Team17 is a leading video games label and creative partner for independent (“indie”) developers. The group supports both owned first party IP and third party IP–through partnering with indie developers globally – in the development and publishing of games across multiple platforms typically for a fixed revenue share. The group focuses on premium, rather than free to play games, and its portfolio comprises over 90 games, including the iconic and well-established Worms franchise, as well as Overcooked and The Escapists.Team17 was founded in 1990 and launched its Games Label in 2014. Team17’s areas of expertise are:
Product acquisition: identifying and partnering with highly creative indie developers, leveraging the group’s highly selective ‘greenlight’ process to identify, screen and appraise potential titles.
IP & product incubation: a 100+ employee internal creative development studio providing essential resources including additional code, art, audio, design, quality assurance, usability, release management, cross-platform development and support services.
Go-to-market execution: Team17 uses the experience, skill-set and know-how within its separate commercial team to create consumer awareness and discoverability on digital distribution platforms through sales, marketing, events, public relations, social channels and community marketing.
Lifecycle management: maximising long term enhanced revenue of games through dynamic price management, incremental downloadable content, promotional planning and strategic additional platform releases.
90pc of the group’s revenues are generated from digital sales, which facilitates a high level of control over pricing and game lifecycle management, with minimal additional development costs post launch. Team17 has released over 100 premium games during its history, including the highly successful Worms franchise, which has continued to generate approximately £5m in annual revenue between 2009 and 2017. Due to the group’s diverse portfolio of owned and third party IP, coupled with its approach to lifecycle management, a substantial portion of revenue has been generated from back catalogue sales (revenue from titles released in previous years accounted for 52pc of 2018 revenue). In addition to this a material proportion of new releases are new titles from existing franchises (follow-on titles from existing franchises with proven audiences).
Yippee Entertainment Limited (“Yippee”), which was acquired in January 2020, is now fully integrated with the team 100pc focussed on Team17 games. In addition to Yippee actively recruiting as we seek to expand our second UK development studio location, we have also maintained our broader recruitment targets during the period. Our successful greenlight process has thrived during the lock-down period with new highly successful virtual gaming events being held to combat the loss of physical events such as the Game Developers Conference and others, and we now have more games in later stage discussion than at any other time in our history. We continue to increase the number of games viewed and assessed and can confirm that we have signed an additional seven new games in the first half of the year for release in future years. This includes for the first-time partners in Mexico and Russia which is testament to how respected our award-winning games label is for delivering excellent results for our label partners around the world. Importantly, our development and commercial teams have successfully launched three new games during remote working with Moving Out and Golf with Your Friends (console) being released as planned in April and May respectively. Furthermore, on 11 June 2020, Main Assembly was launched into early access on Steam. We have continued to support our back catalogue portfolio with a number of paid and free downloadable content throughout the first half which shows the strengths of our lifecycle management, QA, development, production and marketing teams across an ever-growing portfolio of 300+ digital revenue lines.
The company, provides the following trading update ahead of results for the six months ended 30 June 2020. The company has experienced strong sales traction during the period. This good performance has been delivered against the backdrop of the global COVID-19 (“C-19″) pandemic and subsequent lockdown. During these unprecedented times the company has seen above expected demand for its back catalogue, which has outperformed pre C-19 expectations, especially at the height of the lock down during April and May. In addition, further sales traction and increased playtime was generated across our more socially orientated or multi-player co-op and online games, which has enhanced earnings specifically on key franchise titles such as Worms, Overcooked and The Escapists alongside 2019 new game IPs Golf with Your Friends, Hell Let Loose and the recently released Moving Out.” 16 June 2020
Editor’s note: Team17 is one of three UK-based video gaming related businesses in the Quentinvest portfolio. All three are benefiting from the effect of lockdown, not just in the UK, encouraging more game playing. Team17 cautions that the easing of lockdown means that demand has normalised after the exceptional period in April and May. Nevertheless the business is clearly firing on all cylinders and the long-term outlook is exciting.