Nexters Global Plans To Go Public Via Merger With Kismet SPAC At $1.9B Valuation

? Initial Public Offering

• Cyprus-based mobile & social network game developer Nexters announced its plans to go public through a merger with SPAC (special purpose acquisition company) Kismet Acquisition One Corp, founded by former MegaFon PJSC general manager Ivan Tavrin, targeting valuation at $1.9B.

• The company will be listed on NASDAQ under the symbol “GDEV”

• The deal will be financed with ~$250m held in trust by Kismet Acquisition One Corp, and an additional $50m investment by Kismet Capital Group, via an affiliate

• The transaction is expected to bring $150m on the company’s balance sheet, before advisor fees and/or redemptions by Kismet Acquisition One Corp

• The minimum required cash for the deal to be closed is $100m.

• The founders and the management of Nexters will receive 20m earn-out shares over 3 years with a 12-month lock-up period:

  • 50% of the Earn-Out released at $13.5 VWAP (volume-weighted average price)

  • 50% of the Earn-Out released at $17 VWAP

• The deal is expected to close in the second quarter of 2021. The new company will be led by Nexters’ founders: Andrey Fadeev and Boris Gertsovsky

• Nexters also reports founders and existing shareholders (including Playrix founders Igor Bukhman and Dmitrii Bukhman) will invest 92% of their holdings into the new combined company with a 12-month lock-up period

? Financial Highlights

• During FY 2020, Nexters reported $318m of net bookings, compared to $117m in FY 2019, and $31m in FY 2018

• Approximately 37% of net bookings came from the US & Canada, 23% came from Europe and about 19% came from Asia

• Total free cash flow to equity (FCFE) in the FY2020 was $120m with a 38% adjustment FCFE margin, while in the FY2019 FCFE was only $19m with 16% margin

• Based of the Company forecast, Management EBITDA is expected to reach the level of $138m for 2021, and continue to grow up to $201m in 2023

? Business Highlights (For 2020 FY)

• founder-led business with the experienced strategic player Playrix on the board

• 410%+ CAGR of Net Bookings over 2018-2020 period

• $318m Net Bookings (~$460m Gross Bookings) and $120m adj. FCFE (~26% FCFE/Gross Bookings)

• 74% of net bookings generated by the mobile platform, 17% by social, and 9% by web

• diversified end-markets by net-bookings: 37% US&Canada, 23% Europe, 19% Asia

• about 95% of revenue generated by in‐game purchases

• 5.4m MAUs and 0.8m DAUs with ~$100 average net bookings per paying user

• 435 employees, including 230 developers/data scientists and 65 marketing headcount

? Products

• Nexters is a mobile game developer behind popular action RPG Hero Wars. The company is also known for the casual adventure game Island Experiment and MMORPG Throne Rush

• According to AppMagic data, the games published by Nexters have been downloaded more than 100m times, with a peak of $7m downloads in January 2020. The absolute majority of downloads comes from Nexters’ flagship Hero Wars

• Currently, Nexters works on 3 new casual titles, that are expected to expand the company’s portfolio in 2021: an adventure game with match-3 elements Riddle Island and two farming games with adventure elements Chibi Island and Puzzle Island

• In 2021, the company also plans to begin developing the sequel of Hero Wars flagship title. However, it is too early to speak about the release date

? Major Concerns

• Single-hit (Hero Wars) gaming business

• Relatively aged flagship title released in Oct’16 (iOS) / Feb’17 (Android)

• A risky transition in the product strategy — shifting away from mid-core to casual with Nexter’s limited expertise in launching successful match-3/farming games (competing with Playrix’s core expertise)

• Limited Nexter’s management practice in executing M&As in the gaming sector (but experienced shareholders — Kismet led by Ivan Tavrin and Playrix)

• Potential conflicts of interest between Nexters and Plarix in multiple areas:

  • Same labor markets (Russia/CIS);

  • Casual product portfolio;

  • Potential M&As in Russia/Former Soviet Union

SOURCES: NEXTERS, PRESENTATION