2017/18 INTERIM RESULTS 27 MARCH 2018 GAME DIGITAL PLC INTERIM - - PowerPoint PPT Presentation

2017/18 INTERIM RESULTS

27 MARCH 2018

This presentation includes statements that are, or may be deemed to be, “forward- looking statements”. These forward-looking statements can be identified by the use

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forward-looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or current expectations. Any forward-looking statements in this presentation reflect the Company’s current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results

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events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward- looking statements, which speak only as of the date of this presentation. No representations

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warranties are made as to the accuracy of such statements, estimates or projections. Please note that the Directors

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the Company are, in making this presentation, not seeking to encourage shareholders to either buy or sell shares in the Company. Shareholders in any doubt about what action to take are recommended to seek financial advice from an independent financial advisor authorised by the Financial Services and Markets Act 2000.

GAME DIGITAL PLC – INTERIM RESULTS 2017/18 2

Forward looking statements

3

MARTYN GIBBS

Chief Executive Officer

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

H1 Group headlines

4

Strategic progress made across the Group

• Redefining the Group through BELONG which is not exposed to the traditional console gaming

cycle, has high margins and a unique position in the significant growth area of esports

• Collaboration agreement signed with Sports Direct on 12 February 2018, which will accelerate

transformation of the business

• Sale of Multiplay Digital during H1 for £19 million

Positive UK & Spanish GTV trading performance, with reported GTV up +3.8%

• GTV improvement of +24.7% in hardware
• Physical software GTV up +3.3%
• GTV in Events and Esports (excluding Digital) up +31.5%
• Preowned decline of (8.6)% reflecting 2016/17 release schedule

Increased level of cost savings and operational improvements delivered

• UK retail costs reduced by £5 million year on year
• Continued focus on costs and property optimisation, with 272 lease events over the next 2 years
• Even greater efficiencies and savings being implemented during H2 that will completely right size

the business Cash & liquidity position improved

• Group remains well funded with net cash of £84.9 million
• Total current facilities increased to up to c£130 million on signing of collaboration agreement

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Our proposition exploits all elements of esports

6

Casual / Amateur Higher participation, Low viewership

COMPETITIVE GAMING EXPERIENCE

Tournaments Tournaments

Customer Proposition B2B Proposition

GRASSROOTS AMATEUR UK PRO GLOBAL PRO

1 2 3 4

1 2 3 4

Professional / Elite Fewer participation, greater viewership

Overview

• BELONG is the leader in local and

regional esports whilst driving GAME revenues

• Expanded to 19 locations alongside

GAME retail with wide geographical spread

• Relatively low capex with high ROI and

fast payback

• Creates a very high margin profile for

pay to play

• Margin rate of arenas circa. 45% across

pay to play, PC hardware and food & beverage

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

BELONG overview and trajectory

7

50 100 150 200 250 300 350 400 FY17 H1 FY17 H2 FY18 H1

Average Gaming Hours per week per arena

Improved retail performance 5.6% improved core retail LFL performance in Q2 Customer type & spend 24% of customers are new to GAME 36% of them are ‘Big Time Spenders 56% of customers are under 30 £364 Av. annual customer value (GAME £192) Gaming hours & utilisation 370 average store gaming hours per week 176,000 gaming hours in H1

Arenas have held over 450 parties

28.5% utilisation across all arenas Attracting high value PC gamers 27% purchase PC products £5.1k av. store per week through PC categories

+38% +58%

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Core elements of the proposition

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19

BELONG Locations

1

Venues

BELONG Arenas Insomnia Gaming Festival

2 3 4 5 6

BELONG.gg Website Booking Platform Tournament Platform Studio & Production

Infrastructure Tournaments Player Support Retail Team

UK Masters (Semi-pro streamed tournament) BELONG Arena Clash Tribes Team partnerships Industry and charity collaborations PC, hardware, accessories, digital VR and merchandise Food and drink GAME has the required specialist gaming resource

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

BELONG illustrative financials

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Number of Stations Operating Margin Annual Pay To Play Revenue Hours Utilisation Price Per Hour Other Revenue Total Revenue

Collaboration Agreement allows for larger arenas going forward with c.40 desks or more Our most recent

• penings have been of

large arenas with 24- 36 desks The annual pay to play hours per desk per arena are 1,156 78 hours per week, per arena x 52 weeks x average large arena utilisation c.28.5% Assumed average price paid for every hour of gameplay is £4.50 Including activities such as:

• Desk hire
• Party hire
• Arena Clash

Average pay to play revenue per arena is c.£200k Average arena retail sales of £500k per large arena pa Each arena includes additional sales for Food and Beverage, PC hardware, accessories, digital and Virtual Reality Average total revenue per arena is £700k pa GAME share of average annual operating margin per large arena c.23% £150k - £175k Each location also generates profits from GAME Retail (including potential incremental uplifts) Average capex per large BELONG/ GAME £350k Average arena capex £230k and average retail capex of £120k Average payback per large BELONG/ GAME c.2 - 2.5 years

Capex

Stations Growth Utilisation Growth Price Per Hour Growth

294 334 270 280 290 300 310 320 330 340 FY17 H2 FY18 H1

Cumulative BELONG PC Gaming Desks

18.7% 28.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% FY17 H2 FY18 H1

Desk Utilisation %

£3.97 £4.19 £6.75 £7.48 £4.23 £4.43 £0.00 £1.00 £2.00 £3.00 £4.00 £5.00 £6.00 £7.00 £8.00 FY17 H2 FY18 H1

Gross Price Per gaming hour

Std Pay to Play Parties Desk P2P

+10.8% +5.5% +4.7%

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Broad spectrum of games and support

10

BELONG delivers participation in major established esports titles and new releases

NEW PUBLISHER AND DEVELOPER PARTNERS LONG STANDING PUBLISHER PARTNERS INVESTING

Most participated PC Games in arenas are the largest esports titles

Publisher: Riot Games Released: 2009 Status:

• Pay to play live
• League Unlocked

(access to content)

• Arena Clash title
• Team partnerships
• Merchandise

Publisher: Valve Released: 2012 Status:

• Pay to play live
• Monthly

tournaments

• Team partnerships

Publisher: BlueHole Released: 2017 Status:

• P2P tournament agreement
• Monthly tournaments
• Merchandise

Titles participated from BETA

Publisher: Epic Games Released: 2017 Status:

• Available to play
• Streams from BELONG
• 6 x PlayStation arenas

launched

• 6x PSVR executions
• Third party event &

tournament support

• First party title

tournaments

• UK World team meet &

greet

• Arena Clash title
• 1st birthday promotion
• Overwatch league viewing

parties

• WWII launch events
• WWII BETA event
• WWII DLC event
• Arena Clash activity CWL

tie in

• Full launch events for:

Mass Effect Andromeda, FIFA 18, Star Wars Battlefront II

• Madden 2018 tournament

& stream

• Players signings for FIFA &

NFL 2018

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

BELONG infrastructure has been created

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• Site re-designed and relaunched in

January 2018

• Focus on messaging our key news and

event/tournament announcements for BELONG

• Hosts the video of the weekly Arena

Clash show

• Hosts the booking platform for players

to pre-book arena time and guarantee their booking slot and drive utilisation

• All arenas have ‘tribes’ which the local

community can associate with

• 3 game Arena Clash seasons established
• Strong continual growth in participation

since season 1

• Arenas play off against each other
• League winners go through to finals at

Insomnia Gaming Festival

• Weekly video produced to showcase the

best matches of the week

• Supported UKIE’s Digital School House

initiative to host 20 schools for an Overwatch tournament

• Venue and promotional support for pro

esports teams such as eXcel and MCM

• Partnership with Dimensions to

introduce autism friendly sessions into selected BELONGs

• Coaching support for players as part of

the Arena Clash

Website & Booking Platform Arena Clash Gaming Community & CSR

• Player profile and reward mechanics to

incentivise player participation

• Capability to organise tournaments

across multiple physical locations

Tournament Platform

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

BELONG summary and the Collaboration Agreement

12

Locations and Gaming Station Count

• BELONG proposition developing rapidly with 19 locations and 334 gaming

stations

• Pay to play gaming station utilisation continues to grow
• Necessity for larger premises and 24 gaming station minimum going forward
• Our 270+ lease negotiations over the next 20 months allow for re-organisation
• f the estate
• Closing stores replacing with one larger unit to house a BELONG and improve

GAME performance and share of wallet

• Flexibility allows for larger esports competitions at local level

Delivering Transformation in High Growth Market, High Profit & Fast Payback

• Delivers strategic transformation in high growth market
• Remove cyclicality at high margin
• Assumed £350k Capex requirement to site a BELONG arena and GAME store
• £150 - £175k illustrative arena contribution
• c.2 - 2.5 year payback for the joint unit
• All infrastructure has been built with further development such as local leagues

and ladders over the next 12 months Collaboration supports Locations and Gaming Station Count by:

• The Collaboration Agreement allows for speed, space, flexibility and scale
• Gives ability to partner with Sports Direct to deliver a BELONG/GAME offer

within an SPD store, in SPD owned property or stand alone

• Supports lease expiry and relocation strategy
• Supports our landlord negotiations
• Allows for more space to be allocated to BELONG and GAME to capitalise on

more gaming stations and improved retail performance Collaboration supports delivery of Transformation in High Growth Market, High Profit & Fast Payback by:

• Provision of £35m capex facility for BELONG roll out with a seven year loan

repayment on each BELONG /GAME

• Provision of a £20m working capital facility
• Facilitates strategic procurement of fit out costs and improved supplier terms
• Management fee charged as percentage of store turnover
• 100% of BELONG team charged to the new P&L
• £3.2m cash received for 50% of BELONG IP and share of up to 50% of profits

from new and existing venues

13

MARTIN HOPCROFT

Interim Chief Financial Officer

All figures in £m (unless stated) H1 20171 H1 2018 VAR, % Gross Transaction Value (GTV)2 565.4 586.8 3.8 Revenue 498.1 517.4 3.9 GTV & Revenue for Events & Esports 5.4 7.1 31.5 UK operating costs pre except & adjusting items (71.3) (67.3) 5.6 Adjusted EBITDA 23.3 21.2 (9.0) Adjusted profit before tax 16.9 14.2 (16.0) Adjusted (basic) EPS 7.9p 6.4p (19.0) Net cash from operating activities 25.7 32.2 25.3 Cash 73.0 84.9 16.3

• Group GTV up 3.8% including the benefits of:
• Hardware improvement of +24.7%
• Physical software increase of +3.3%
• Events and Esports sales up +31.5%
• Preowned down (8.6)%
• Strong cost discipline across the business, with
• ver £5 million of costs savings realised in UK

Retail

• Overall cost decrease includes exchange

rate impact on Spanish operations

• Positive cash generation continued in the

period

• Group remains well funded with net cash of £84.9

million with recently expanded facilities of up to c£130 million

1.2017 restated for the reclassification of marketing income 2.Gross Transaction Value is a non-IFRS measure defined as total retail receipts excluding VAT and before the deduction of revenue deferral relating to reward points. Gross Transaction Value reflects the full sales value of digital sales, agency sales (including sales by business partners on GAME’s Marketplace website), warranties and other similar arrangements and thereby includes the publishers’ and sellers’ shares of those transactions

Sales growth delivered in UK and Spain with significant cost savings achieved in UK Retail Strong cash position and significantly higher facilities available to deliver continued growth

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

H1 2017/18: Group financial summary

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All figures in £m (unless stated) H1 2017 H1 2018 VAR, % Total Hardware 117.6 146.7 24.7 Total Content 262.1 265.3 1.2 Physical software 184.7 190.8 3.3 Digital content 77.4 74.5 (3.7) Total A&O 90.0 87.3 (3.0) Core A&O 82.3 78.4 (4.7) Events & Esports 5.4 7.1 31.5 Digital1 2.3 1.8 (21.7) Total Preowned 95.7 87.5 (8.6) Preowned (core) 71.4 63.2 (11.5) Preowned tech 24.3 24.3

• Total

565.4 586.8 3.8

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Group GTV by category

Strong GTV growth across hardware, physical software and Esports & Events

15

• Strong hardware sales supported by Nintendo Switch benefit, Xbox One

X launch and stronger relative PlayStation 4 performance

• Preowned tech flat, core preowned down 11.5% given mint software

performance in the prior year

• Growth in core console accessories and pc accessories of 8.2% offset

declines in VR (major launches in H1 2017) and Toys to Life category

• Sales across BELONG and Game Esports and Events up 31.5% and gross

profit up 250% driven by higher margin events

• Physical software increase driven by the strong performance of

Nintendo Switch

• Xbox One and PlayStation 4 sales increase of 0.5% supported by non

perennial titles e.g. Destiny 2 and stronger year on year performance of Call of Duty

1 Multiplay Digital sold on 28 November 2017 and activities discontinued

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Group gross margin (as % of GTV) by category

Overall Group gross margin % impacted by higher mix of lower margin hardware

16

Note: Calculated as % of GTV

H1 2017% H1 2018% % PT CHANGE Hardware 5.7 7.1 1.4 A&O 29.9 32.9 3.0 Content 23.0 21.6 (1.4) Physical software 24.3 24.5 0.2 Digital content 16.9 14.2 (2.7) Preowned 34.6 30.5 (4.1) Total 22.5 21.0 (1.5)

• Hardware margins up 1.4% pts, benefiting from improved terms and

new console launches including Nintendo Switch full price sales

• Mix effect, predominantly higher margin achieved in E,E&D and mix of

products in this category (VR launches LY at lower average rates)

• Software margins increased 0.2% pts, with improved stock

management and further supplier support

• Digital margins down 2.7% pts year-on-year
• Preowned margin rates fell 4.1% pts due to increasing mix of Xbox One

and PlayStation 4 which achieve lower margin rates than older formats, as well as lower gross profit rate on preowned technology products

Higher margin rates achieved across hardware, physical software and accessories & other

• Total underlying operating costs1 of £108.3

million, reduced by 1.0%

• Continuing costs1 excluding depreciation and

amortisation reduced by 1.8% to £101.9 million

• Significant cost savings and operational

efficiencies realised in the UK

• UK Retail costs down £4.0 million or 5.6% to £67.3

million

• Spain Retail costs up €1.4 million or 4.3% in

local currency, significantly lower than growth rate of GTV

• Events, Esports and Digital costs1,2 reduced by

£0.1 million to £4.0 million, reflecting the continued expansion of BELONG and lower costs in Game Esports & Events and Multiplay Digital (following the sale)

• 1. Excludes exceptional and adjusting items
• 2. Before depreciation and amortisation
• 3. 2017 restated for the reclassification of marketing income

Group Continuing Costs1 £m (unless otherwise stated) H1 20173 H1 2018 VAR, £m Selling & Distribution costs 82.2 80.5 1.7 Administrative costs 27.2 27.8 (0.6) Total Operating expenses 109.4 108.3 1.1 Less: Underlying Depreciation & Amortisation (5.6) (6.4) 0.8 Total Operating expenses before D&A 103.8 101.9 1.9 as % of GTV 18.3% 17.3% Group Continuing costs by division1,2 £m (unless otherwise stated) H1 20173 H1 2018 VAR, £m Core Retail 99.7 97.9 1.8 UK Retail 71.3 67.3 4.0 Spain Retail 28.4 30.6 (2.2) Spain Retail, €m 32.9 34.3 (1.4) Events, Esports & Digital 4.1 4.0 0.1

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Group operating costs

Strong cost reduction programme continues in UK business

17

• Further property savings realised in the

period including rent and rates

• Payroll cost savings from organisational

redesign and store staffing efficiencies

• Business wide savings from efficiency

measures and procurement activities

• Pursuing even greater savings in H2 17/18

across property, payroll, distribution, procurement and central operations plus cost initiatives within gross profit including changes to loyalty arrangements and refunds and returns £m Total savings achieved in FY17 Total savings realised in H1 Targeted savings for in H2 Property 1.4 1.6 c.1.5 Payroll 3.8 1.6 c.1.5 Procurement, distribution, efficiency savings and

• ther

1.4 1.8 c.3.0 Total 6.6 5.0 c.6.0

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Operational efficiencies and cost savings have continued

18

Continued delivery of efficiency initiatives, procurement benefits and other cost saving actions

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Property optimisation programme update

19

1 Since UK action plan initiated in January 2016

• Successfully realising opportunities to significantly reduce UK

estate costs including store closures

• Total annualised group rent reduction of c.£4.7m to date1
• 66 leases renewed in stores to date1
• 23 renewed at zero rent
• Average rent reduction of 41%
• 25 renewals in H1 17/18 with 23 on improved terms
• Average length to first break 1.1 years
• Planning for 233 UK lease events in the current calendar year

and 272 over the next 2 years

• Total annual rent of c.£16.7m

233 39 13 9 1

50 100 150 200 250 To Dec 18 2019 2020 2021 2022 2023+

UK Lease Expiry Profile

• No. of Leases Expiring

• Cash generated by operations of £36.3

million up 29.6% with strong working capital management

• Proceeds of £14.9 million (net of fees and

escrow balance) received from the sale of Mulitplay Digital

• Continuing investment for growth with capital

expenditure of £6.2 million in the first half, and planned acceleration of the BELONG roll out under the Sports Direct collaboration

• Free cash flow of £41.0 million, up 23.1% on LY

£m H1 2017 H1 2018 Var, £m Operating profit 17.3 12.9 (4.4) Depreciation & amortisation 10.4 11.1 0.7 Exceptional profit on sale of assets (6.3) (6.0) 0.3 Working capital and other items 6.6 18.3 11.7 Cash generated by operations 28.0 36.3 8.3 Proceeds from sale of business/property 13.3 14.9 1.6 Sub-total 41.3 51.2 9.9 Capital expenditure (5.8) (6.2) (0.4) Taxation (1.4) (3.7) (2.3) Net interest (0.8) (0.3) 0.5 FREE CASH FLOW 33.3 41.0 7.7

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Cash flow generation

Continued strong free cash generation

20

• Strong closing cash position of £84.9 million
• As at 27 January 2018, all facilities were undrawn
• Following the completion of the SPD agreement,

total available facilities have been increased to c£130 million (2017: £80 million)

• UK ABL facility of up to £50 million, rising to

£75 million in peak

• Additional new facilities in UK of £55 million,

provided by SPD (Capex facility of £35 million and working capital facility of £20 million)

• New 2 year Spanish facilities finalised in January

2018, with potential to extend for a further year

• Working capital and guarantee facilities in

Spain of €28 million, rising to €44 million in peak

• Total maximum facilities over peak season of

c£169 million £m H1 2017 H1 2018 Var, £m Opening cash 43.1 47.2 4.1 Cash generated by operations 28.0 36.3 8.3 Proceeds from sale of business/property 13.3 14.9 1.6 Tax, interest, dividends & other (4.9) (6.0) (1.1) Capex (5.8) (6.2) (0.4) Movement in borrowings (0.7) (1.3) (0.6) Movement in cash 29.9 37.7 7.8 Closing cash 73.0 84.9 11.9 Finance leases (4.0) (2.7) 1.3 Net cash 69.0 82.2 13.2

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Cash flow & net cash

Strong cash position and increased available facilities

21

• Positive market trends seen in H2 16/17 last year continued throughout H1 17/18 in both territories for core

console categories. Cumulatively the UK and Spanish markets remain in growth so far this year

• Strong demand for Nintendo Switch has continued to deliver growth to the overall market and consumer

interest is expected to remain strong from newly announced software titles (Super Smash Bros. and a Pokémon game) together with associated products including the new LABO range

• Cost focus has been intensified for the balance of H2 to mitigate margin pressures
• Further supportive market developments in the second half of the calendar year, with major new game titles

announced, e.g. Call of Duty: Black Ops 4 and a number of non-perennials including Red Dead Redemption 2 and Shadow of the Tomb Raider

• Growth in BELONG and Events & Esports planned under major transformation strategy

1 Source GfK Chart-track

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Market update and outlook

22

23

MARTYN GIBBS

Chief Executive Officer

24

MARKET UPDATE

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Market Update – Esports and monetisation

25

SOURCE – NEWZOO 2017 GLOBAL ESPORTS MARKET REPORT

A new business model into the group that directly commercialises gamers outside of retail (pay to play / food & drink) Converting the average gamer into a competitive gamer significantly increases their lifetime value By reaching existing competitive gaming communities & PC gamers that sit outside of GAME’s current retail sphere of influence Help negotiate better margin, terms and exclusive content from partners. New monetisation routes through event/ tournament organisation Frontline engagement of the next generation of customers Have access to a more holistic understanding of the gamer behaviour through retail and their engagement in esports/ competitive gamers

Introduce new revenue/ margin streams for GAME

1

By increasing the value of our existing customers By acquiring new customers Through the increased support of existing and new suppliers and partners GAME’s value proposition remains relevant in changing market conditions Increasing the volume, range of data and our understanding of gamer behaviour

2 3 4 5 6

$0.3 $0.7 $1.5

0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total Esports Rev

120M 191M 286M

Number of eSports enthusiasts

Revenue in bn’s ($)

$11 $5.2 $2.7

>$3.0bn $1.0bn

Average Esports Global Revenue per Enthusiast

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

1.8% 15.7% 8.3% H1 16/17 H2 16/17 17/18 YTD*

• First half FY 17/18 growth driven by:
• Nintendo Switch
• Xbox One X launch
• Stronger new release performance
• Impacted by:
• Low margin hardware
• Continued online growth
• Preowned software and GameTronics decline
• Positive dynamics in H2:
• Continued Switch availability
• Further Nintendo releases
• 12.5%

8.8% 10.0% H1 16/17 H2 16/17 17/18 YTD*

Mint Video Game Market Performance

Market Update – UK & Spain performance

26

33 Weeks to 17 March

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

1 2 3 4 5 6 7 8 9 10

Month 1 Month 3 Month 5 Month 7 Month 9 Month 11 Month 13 Month 15 Month 17 Month 19 Month 21 Month 23 Month 25 Month 27 Month 29 Month 31 Month 33 Month 35 Month 37 Month 39 Month 41 Month 43 Month 45 Month 47 Month 49 Month 51 Month 53 Month 55 Month 57 Month 59

Months Since Launch

Comparison of latest generation (PS4/Xbox One vs Prior generation (PS3/Xbox 360) – UK

UK Latest Generation (PS4/Xbox One) Prior Generation (PS3/Xbox 360) 1 1 2 2 3 3

Month 1 Month 3 Month 5 Month 7 Month 9 Month 11 Month 13 Month 15 Month 17 Month 19 Month 21 Month 23 Month 25 Month 27 Month 29 Month 31 Month 33 Month 35 Month 37 Month 39 Month 41 Month 43 Month 45 Month 47 Month 49 Month 51 Month 53 Month 55 Month 57 Month 59

Months Since Launch

Comparison of latest generation (PS4/Xbox One vs Prior generation (PS3/Xbox 360) – Spain

Latest Generation (PS4/Xbox One) Prior Generation (PS3/Xbox 360)

• Console unit sales of current generation continues to outperform previous console cycle in UK & Spain
• PlayStation mix growing in UK

Market Update – Latest generation of consoles performing well

Units sold million Units sold million

27

56% 43% 44% 57%

PS3/Xbox 360 PS4/Xbox One Xbox PlayStation

New console cycle

369 383 313 473 56 195 177 143 601 490 501 426 21 106 149 178 200 400 600 800 1000 1200 1400 16/17 17/18 18/19 19/20

UK Market Value Hardware & Software: Playstation, Xbox and Nintendo Switch

PS & XB HW Switch HW PS & XB SW Switch SW

490

650 596

Market Value +12% Market Value +7%

616

GAME DIGITAL PLC – INTERIM RESULTS 2017/18 28

• 17/18 overall market value forecast to increase by 12% (H1: +14.3%)
• 18/19 market growth in high margin software category of c9% has been forecast
• 19/20 Hardware growth of c26% based on market analyst expectation of PS5 launch, with start of the next console cycle
• 19/20 overall market value forecast to grow by 7%
• Forecast may change for new releases as further announcements are made

IHS (March 2018)

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Major drivers in core business

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Esports growth will continue at pace

• Revenues are growing exponentially in all areas of esports both from viewership and participation

Nintendo Switch continues to grow

• Significant installed base established and high tie-ratios supporting mint and preowned margin
• Any future price point reduction will drive further growth

New release schedule across all formats is strong

• New non-perennial titles will drive positive overall market dynamics e.g. Red Dead Redemption 2

announced for Oct 18 & Shadow of the Tomb Raider

• Super Smash Bros. and strong line up of other games will support Switch growth
• Call of Duty launch window redefined with Black Ops 4 announced for October release

Current generation of consoles growth expected to continue’

• Significant installed base established, future expected price point reduction will drive further growth

PlayStation 5 launch forecast by market analysts for peak ‘19

• Increased penetration levels expected in both UK and Spain

Continued pressures factored in

• Reduced preowned revenues across software and mobile phones
• Continued move to online but growing share of the online channel
• Digital downloading continues to grow but with further retail opportunities to exploit the market

30

BUSINESS & STRATEGY UPDATE

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Building the most valuable community for gamers

31

4.6m Active

(LTM)

CORE SPECIALIST RETAIL MAJOR GAMING EVENTS ESPORTS, BELONG & COMPETITIVE GAMING

E V E N T S

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Game changing strategy recap: Pillars & 2018 priorities

32

• 3. Optimise the Group's

efficiency whilst investing for the future 1. Optimise fixed & variable store costs 2. Distribution efficiencies 3. Procurement & business process improvements 4. Supplier arrangements

• 2. Continue to improve our

retail businesses in the UK & Spain in order to maximise market potential 1. Continue to enhance the Group’s specialist proposition 2. Build new categories & services 3. Multichannel development 4. Store optimisation

• 1. Expand live and online

gaming services for gamers and publishers 1. Local competitive gaming and esports, headlined under BELONG 2. Insomnia Gaming Festival 3. Major third party contract events

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Our Esports approach

33 UK MASTERS FINALS BELONG CUPS LOCAL (TOWN) TOURNAMENTS LOCAL ARENA TOURNAMENTS BELONG ARENA CLASH

BELONG T/MENT PLATFORM

REGIONAL TOURNAMENTS WEBSITE & BOOKING SYSTEM BELONG KIDS TOURNAMENTS UKM BYOC LAN TOURNAMENTS

GRASSROOTS AMATEUR UK PRO GLOBAL PRO

ESPORTS MERCHANDISE PLAYER PRODUCTS

RETAIL OPPORTUNITIES

PC AND VR HW, SW, DIGITAL AND ACC HIGH END PERIPHERALS UK MASTERS SEASONS UKM ONLINE CUPS

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Expanding the Group’s live gaming services

34

Events Overview

• Events business increase in EBITDA H1 versus LY through higher margins and cost savings
• Stronger performing events in H1 YOY (RuneFest and Minecon)
• Core Insomnia continues to grow and evolve with more focus on BELONG and esports

Insomnia Overview

• Insomnia 61 is the most successful to date driven by Esports / BELONG and gaming

Influencers (78m subscribers)

• Insomnia 62 Call of Duty World League with a $200,000 prize fund, the only open event
• utside of the US in 2018, to be held at Insomnia 62 after hugely successful Easter event

last year

• Insomnia 62 influencers with 50m+ subscribers and Microsoft, Nintendo and Sony all

attending Insomnia Franchise

• Insomnia Franchise (with esports as the key differentiator) now an established program
• Four initial territories in negotiation to drive additional margin as well as licence fees

Third Party Events

• All four BRICKLIVE shows delivered over 72,000 footfall in total
• Rentals up YOY with exclusive agreements now with HTC-Vive and Intel for events

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Game changing strategy recap: Pillars & 2018 priorities

35

• 2. Continue to improve our

retail businesses in the UK & Spain in order to maximise market potential 1. Continue to enhance the Group’s specialist proposition 2. Build new categories & services 3. Multichannel development 4. Store optimisation

• 1. Expand live and online

gaming services for gamers and publishers

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Maximising retail priorities

36

Continue to improve

• ur retail businesses

in the UK & Spain in

• rder to maximise

market potential

Continue to enhance the Group’s specialist proposition

1 2

Store estate optimisation Multi-channel development

3 4

Build new categories & services

2

Continued development and improvement of customer loyalty programmes

• GAME Reward card scheme with 4.6m active reward customers in the UK & Spain
• GAME Elite subscription model launched May 2017 in the UK
• Enhanced points and exclusive offers driving higher spend and greater engagement
• Strong engagement with over 80,000 sign-ups to date

Securing “Only at GAME” exclusive ranges from supplier partners

• In 2017, 8 out of the top 10 peak titles had an “Only at GAME” exclusive element
• Ongoing discussion with supplier partners to secure a number of specialist exclusives for 2018

Creating a relevant and credible marketing strategy to engage with gamers

• New marketing strategy established to drive reach and engagement of gamers through peak
• Black Friday ‘Deadline Deal’ campaign featuring Harry Redknapp delivered 137.5m impressions
• Shortlist Media partnership driving 1.54m engagements
• Mail Online & Metro partnership, reaching gamers & gifters, creating 264.7m impressions

Content first strategy through social media channels

• Improved impressions (engagement with content) to 2.2m on Twitter & 1.5m on Facebook since

March with Facebook and September with Twitter

• Player 1 Talent influencer programme expanded with over 350 talents signed up with a combined

following 37.1m

• Weekly YouTube show TL;DR launched in February 2018 bringing gaming news and content to

gaming community

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

• 1. Specialist proposition

37

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

• 2. Build new categories & services

38

Build on current success achieved in BELONG locations

• Margin rate of arenas circa. 45% with pay to play, food and drink, PC hardware /

accessories / digital

• Arenas have supported improved performance in core retail in LFL arenas is 5.6%

up on non-arena locations in Q2 FY18

• Margin rates of combined arenas and stores are higher than non-arenas given the

P2P margin at 100%

• Supplier support on exclusive offers for core console categories
• PC category
• Entrance into PC hardware sales at higher margin than console
• Redefined PC accessories sales
• Digital sales to those playing in arenas
• Food and drink proposition launched and opportunity to further exploit with long

dwell times in arenas

• Exploiting services especially warranties and consumer finance
• Sales of VR through creating the experience
• New licensed merchandise category opportunities to deliver for most engaged PC

gamers and esport participants

VR PC LICENSED MERCHANDISE SERVICES CORE CONSOLE & DIGITAL FOOD & DRINK

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

• 3. Multi-channel development

39

2017 Developments 2018 Priorities

Customer Retention

• Improvements to the customer end to end journey
• Customer self service & efficiency programme
• Improved product recommendations and customer upsell tools

Customer Retention

• New checkout for Mobile & Desktop
• Launch of new product categories and Services

Delivery Services

• Order in-store, now available in ALL stores
• Free next day (Royal Mail) order placed before 3 pm (later cut off)
• Launch of new tracked services with Yodel and DPD

Delivery Services

• Collection points increased (new service with Collect +)
• Basket up-sell to qualify for free delivery
• Launch of tracked service for International Orders (Asscendia)

Omni-Channel Services

• Click & Reserve/Collect from Store enhanced or launched
• Trade-in online launched
• Store stock available on-line & despatch from stores launched

across 250 stores Omni-Channel Services

• Expanded range of store product categories available on-line &

despatched from stores

• Additional online services e.g. GAME Elite, warranties, disc-care,

BELONG PC build Ways To Pay

• PayPal credit launched with over £17m in sales in H1

Ways To Pay

• Consumer finance product implemented
• Delivery upgrade prompts when purchasing

Pre-Orders

• Implemented customer self service for pre-order payments
• Improved product content and information

Pre-Orders

• Further improvements to customer journey & self service
• Pre-order on-line collect from store service
• Pre-order upgrade proposition to fully exploit exclusives

Specialist Games Retailer

• Refresh content and improved merchandising and attach
• New Homepage design launched

Specialist Games Retailer

• Site Navigation, and new PLP and PDP pages together with content

improvements

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

• 4. Store estate optimisation

40

Small store offering, a reduced range and task, with less operating and staff costs. Concessions in markets where standalone stores are not financially viable

SMALL / CONCESSION

SMALL STORE / CONCESSION STORE RECONSTRUCTION

• Exit stores unless significant fixed costs reduction achieved
• Low Capex in secondary locations
• Low operating costs in smaller locations
• Capitalise in larger properties on expanding categories esp. console

accessories, console digital, PC and accessories TO ACHIEVE

• Further negotiating power with landlords
• Space in all major cities and towns
• Cash and facilities to enact property strategy

GAME / BELONG

Leverage BELONG fully for footfall and experience and deliver a specialist range catering for improved core console proposition with greatly increased engagement with PC gamers

• 4,000 – 7,000 sq. ft.
• Efficient hours usage
• 48-100 gaming stations
• Expanded specialist range
• Bespoke look & feel
• New brand
• Lighter task levels
• Cluster management
• 80/20 range
• Low operating costs

BELONG WITH A GAME STORE 233 39 13 9 1

50 100 150 200 250 To Dec 18 2019 2020 2021 2022 2023+

UK Lease Expiry Profile

• No. of Leases Expiring

THE TWO MODELS

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Game changing strategy recap: Pillars & 2018 priorities

41

• 3. Optimise the Group's

efficiency whilst investing for the future 1. Optimise fixed & variable store costs 2. Distribution efficiencies 3. Procurement & business process improvements 4. Supplier arrangements

• 1. Expand live and online

gaming services for gamers and publishers

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

• Collaboration Agreement allows for broader, longer term approach to improving agreements with

suppliers

• Positive specialist support, including improved exclusives
• Active engagement on strategic live gaming initiatives

Supplier Arrangements

• Head Office reorganisation actioned across all levels
• 10% of roles impacted
• Stores management structure in retail improved

Organisational Efficiency and Design

• Planning for lease events across over 70% of the UK estate by end of 2018 and over 90% by end of 2019
• Total annualised benefits of over £4.7m since programme implemented
• Target property savings of a further £1.5m in H2
• BELONG/GAME enacted in ideal locations and close existing stores

Property

• Loyalty scheme, refund policy, GAME Elite introduction, DC efficiencies and store payroll
• Savings in excess £11m targeted in this financial year

Operational Costs & Business Processes

• Strong cash position increased year on year £11.9m to £84.9m
• Stock management strengthened delivering £11.7m improved working capital
• Total facilities in place of up to £130m
• Collaboration agreement gives £55m of additional facilities

Cash & Working Capital

Right sizing our retail business through significant cost savings

1 2 3 4 5

42

Whilst fully optimising BELONG and the Collaboration Agreement

43

CLOSING REMARKS

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

H1 Summary

44

Business transformation activities fully developed with a clear strategy and plans to address long term structural changes in our markets

• Targeting major new growth markets across the group especially esports
• Pleasing build of BELONG pay to play activities, entry into new retail categories and positive

impact on core retail

• Collaboration Agreement entered into to realise full BELONG potential
• Infrastructure created to improve further utilisation and price per hour initiatives
• New esports innovations to drive growth and impetus in 2018

Right-sizing of retail continues

• Positive market growth in the UK and Spain
• Margin challenged through hardware mix and pressure on preowned
• Successful negotiations at lease events as we enact 200+ lease renegotiations
• Significant cost saving and efficiency programme successfully enacted £5m saving

delivered in H1 and further initiatives in place

• Investment in multichannel and our differentiated, specialist proposition
• Prepared for improving line up of games in 2018/19

Strong cash generation and disciplined use of capital Spanish market and GAME’s performance remain strong

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Future priorities

45

Expand live and online gaming services for gamers and publishers

• Continue to transform our retail business to one which delivers high growth and high

margins and reduces previous console market cyclicality

• Increase station count, drive utilisation and price per hour in BELONG arenas
• Move our customer proposition to a unique model to deliver the very best esports and

competitive gaming approach Continue to improve our retail business in the UK and Spain in order to maximise market potential

• Maximise new product launches and exploit current market
• Further develop our specialist proposition through customer loyalty, exclusives, credible

marketing and content first approach

• Utilising BELONG to drive core retail performance and bring in new retail revenue streams
• Grow share of wallet in the online channel through online services and proposition

development

• Fully utilise the 230+ lease events to deliver the desired BELONG and GAME future approach

Optimise the Group’s efficiency whilst investing for the future

• Gain further supplier support for BELONG and GAME
• Realise the full benefit of the improved negotiated property deals
• Continued focus on cash generation and disciplined use of capital
• Realise all upside from the cost savings programme to deliver over £11m in FY17/18

46

QUESTIONS

47

APPENDIX

500 1,000 1,500 2,000 2,500 FIFA 18 v FIFA 17 COD WW2 v COD IW Assassins Creed v Watch Dogs 2 Star Wars v Battlefield Destiny 2 SWITCH: Super Mario / Mario Kart

H1 FY17/18 H1 FY16/17

500 1,000 1,500 2,000 2,500 FIFA 18 v FIFA 17 COD WW2 v COD IW Assassins Creed v Watch Dogs 2 Star Wars v Battlefield Destiny 2 SWITCH: Super Mario / Mario Kart

H1 FY17/18 H1 FY16/17

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Software market top titles – UK & Spain

48

Source: GfK Chart-Track, Spanish market, units sold in H1 18 vs. H1 17

• Total mint market up 14.3% in H1
• Total software mint market up 6% in H1
• Software market growth supported by stronger:
• Call of Duty performance
• Destiny 2, a non-perennial title without an equivalent in the previous year
• Switch new releases – Super Mario Odyssey and Mario Kart, without an

equivalent titles in the previous year

• Total mint market up 13.5% in H1 in local currency
• Total software mint market up in H1 12.4% in local currency
• Software market growth supported by stronger:
• FIFA, Call of Duty and Assassin’s Creed performance
• Switch new releases – Super Mario Odyssey & Mario Kart, without an

equivalent title in the previous year

Source: IHS

49 GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Console digital market continues to enable growth for GAME

429 580 725 875 934 1,022

2013 A 2014 A 2015 A 2016 A 2017 A 2018 E

Total UK console digital content market £m (UK Only) 60.4 72.3 79.3 96.8 57.5 59.5

FY14 FY15 FY16 FY17 H1 FY17 H1 FY18

GAME console digital sales (GTV), £m Total UK console digital content market £m (UK only)

10,000 20,000 30,000 40,000 50,000 60,000

SWITCH weekly sales - 52 weeks since launch (excludes launch week)

1,373,102 138,567 653,451 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000

Install Base 1st Year of Launch - Nintendo Consoles

Wii Wii-U SWITCH

78% 47% 22% 53%

NINTENDO PLAYSTATION Physical Digital

UK & Spain Markets – Nintendo software market is dominated by physical content sales

GAME DIGITAL PLC – INTERIM RESULTS 2017/18

Nintendo Switch performance

50