Team17 Regulatory News (TM17)

6 January 2022

Team17 Group plc

("Team17", the "Group" or the "Company")

Acquisition of US based indie publisher The Label

Team17, a global games entertainment label, creative partner and developer of independent ("indie") premium video games, and developer of educational entertainment ("edutainment") apps for children, is delighted to announce the acquisition of The Label (the "Acquisition"), a USA based indie publisher specialising in mobile subscription games content for an initial consideration of $24.0 million (£17.76 million) with additional earn out consideration of up to a maximum of $16.0 million (£11.84 million) over the next three years. The total consideration of up to $40.0 million (£29.6 million) will be paid through a combination of cash and shares, which are subject to a 12 month lock-in period.

The Acquisition's initial consideration will be satisfied through a combination of $18.0 million (£13.32 million) in cash from existing reserves and the issue of 604,543 consideration shares, valued at $6.0 million (£4.44 million), based on an issue price of 734.44 pence which are subject to a lock-in period of 12 months from the date of the Acquisition. A further potential payment of up to $16.0 million (£11.84 million) will be paid within three years based on meeting challenging EBITDA performance targets, paid through a combination of cash and shares.

The Acquisition represents a significant strategic milestone for Team17, enabling Team17's Games Label to extend its reach into the high growth mobile subscription segment of the games industry, and further build on its reputation as a major player in the wider digital entertainment landscape.

Acquisition highlights:

· Established in 2014, The Label is a leading independent games publisher based in San Francisco. As a launch partner to both Apple and Google subscription gaming services, The Label is considered a pioneer within the subscription games market.

· The Acquisition represents an exciting opportunity for the Group to significantly expand its market reach and knowledge across the mobile and subscription games arena, a market which is projected to exceed $11 billion per annum by the end of 2025 (Source: Statista / Simon Kucher / Newzoo).

· Supported by the wider Team17 Group structure, the Acquisition will join Team17's existing Games Label to provide a mobile subscription arm and collectively work with joint strategic partners to pursue the Games Label's ambitious growth objectives.

· Team17 will also look to harness The Label's mobile gaming expertise to develop and further capitalise on the Group's existing IP, broadening the overall scope of its digital entertainment operations.

· The Acquisition will be margin enhancing to the Group and is expected to deliver earnings accretion in the first full year of ownership.

($USD to £GBP 0.74 conversion rate used)

Information on The Label:

Established in 2014 by an experienced team of mobile game developers, The Label accelerates the growth of emerging indie games studios by providing the funding, marketing and design expertise to form enduring relationships with subscription platforms. Current studio partnerships include Triband, Flightless and Cipher Prime, with The Label also collaborating with highly regarded independent developers such as Ed McMillen, Mark Rubin and Itay Keren of Untame.

Subscriptions are fast becoming the go-to revenue stream for top mobile games developers. Whilst the market was previously dominated by free-to-play apps, studios increasingly view the subscription model as a vital means for securing consistent revenues.

Crucially, the growth of subscription-based gaming platforms remains at an early stage. As such, subscription services including Apple Arcade, with which The Label already has a long-standing commercial relationship, Google Play Pass and Netflix, all have significant runway to build out their catalogues, attract new customers and keep existing users engaged.

The untapped addressable market represents a sizable opportunity for publishers, and as an early frontrunner in this segment of the industry, The Label is ideally placed to capitalise.

Strategic rationale for the Acquisition:

The Acquisition of The Label will further expand Team17's capabilities across the digital entertainment space, consolidating the Group's position as a leading gaming and entertainment business and providing a wealth of opportunities for significant further growth, which include:

· Expanding Team17's portfolio to include a dynamic and fast-growing mobile subscription arm to Team17's Games Label, in addition to further enhancing the Group's commercial relationships with both Google Play and Apple Arcade.

· Providing the Group with access to a new, highly specialised talent pool with an outstanding understanding of subscription gaming platforms.

· The Group believes demand in this sector will continue to accelerate and that the Acquisition provides Team17 with the capabilities to fully leverage the Group's 1st and 3rd party IP's in this growing opportunity.

· The Acquisition will create significant brand synergy benefits between Team17's Games Label and The Label, which include enabling the Group to combine an unrivalled content offering to subscription gaming platforms within the gaming eco system. Team17's highly regarded games portfolio continues to further expand its revenue and franchise footprint.

Michael Pattison, CEO of Team17 Games Label, commented:

"We are absolutely thrilled to be joining forces with The Label's entrepreneurial team, who are true pioneers in the delivery of quality mobile subscription games and technology. We are excited to tap into their unrivalled market and gaming experience to further take advantage of this growing market.  

"The Label is a fantastic addition to the Team17 family, creating an indie game powerhouse across PC, console and mobile platforms. We look forward to helping them build on their impressive track record of success, further enabling them to scale even greater heights in support of our ambitious growth aspirations. "

Joshua Babich, General Manager and Vice President, commented:

"It's an honour to join the world's leading independent games publisher. Team17 has been a pillar of excellence for over three decades for gamers and creators, bringing some of the most imaginative and unique titles to life. With their support the sky's the limit and our partners can feel confident our combined leverage will accelerate success for all.

"Joining the Team17 family opens up unprecedented doors for us all. While we've carved out a strong foothold in the mobile subscription space, this allows us to instantly expand our market reach in ways that just wouldn't have been possible before. We are delighted to be part of a Group that puts games development and creativity first!"

Enquiries:

About Team17

Team17 is a global games entertainment label and creative partner for independent ("indie") developers, focused on the premium, rather than free to play market, and creating games for the PC, console, mobile and tablet gaming markets and developer of educational entertainment ("edutainment") apps for children.

Alongside developing the Company's own games in house ("first party IP"), Team17 also partners with independent developers across the globe to add value to their games in all areas of development and production and in bringing them to market across multiple platforms for fixed percentage royalties ("third party IP").

Since foundation in 1990, the Company has launched over 100 games, including the iconic Worms, Overcooked! and Escapists franchises, Yooka-Laylee, Yoku's Island Express, My Time at Portia, Hell Let Loose, Blasphemous, Golf With Your Friends, Neon Abyss and Moving Out making Team17 one of the most prolific developers and diverse partners of games for the indie market.

In July 2021, Team17 acquired StoryToys, a world-class developer and publisher of educational entertainment apps for children with many leading children's brands, including LEGO®, Disney, Pixar, Penguin, Warner Bros, Sesame Workshop, Dick Bruna, Hasbro, and Nickelodeon.

 Visit www.team17.com for more info.