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Scopely

Entertainment and mobile games
Pre-IPO
Medium risk

Estimated revenue in 2019-2020

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Investment Idea Details
About the company

Scopely is an interactive entertainment and mobile games company. It partners and collaborates with game developers and global entertainment companies to bring distribution and monetization technology to free to play games. Central to Scopely’s success is the publishing platform behind the company’s games, a collection of software tools that help developers more quickly create mobile games, keep them fresh with new content and generate revenue from them. Scopely relies on both external studios and in-house development teams to create the games, and licensing well-known intellectual properties for its games from entertainment companies such as WarnerMedia and CBS.

Scopely oversees marketing, analytics, ads, business development, live ops, quality assurance, community management, and more, empowering developers to focus on building and refining gameplay experiences to earn the loyalty and love of players around the world. Scopely was founded in 2011 in Los Angeles, US, and has offices in Barcelona, Dublin and Tokyo with additional studios in seven countries across four continents. The company has around 1200 employees.

Market Opportunities

Recognized in Fast Company’s ‘World’s Most Innovative Companies’ and #2 on Deloitte’s ‘Technology Fast 500’ as one of the fastest-growing companies in North America, Scopely has achieved more than $1 billion in lifetime revenue by creating long-lasting game experiences. Scopely’s players are spending 80 minutes per-day on games like “Star Trek Fleet Command,” “MARVEL Strike Force,” “Scrabble GO” and “YAHTZEE with Buddies,” and that time spent is actually spent socially.

Mobile technology has reshaped the role that games play in our lives. Mobile games have become a compelling way for people to interact with family and friends, and even build new game-based relationships. Mobile gaming is the fastest growing component within the video games industry. According to Newzoo, approximately 2.5 billion users spent time and money on mobile games in 2019 and mobile gaming revenue is expected to grow to approximately $114.4 billion in 2023, representing a compound annual growth rate of 9.8% from $86.3 billion in 2020.

Risks

Scopely relies on third-party platforms, such as the iOS App Store, Facebook, and Google Play Store, to distribute its games and collect revenues, and such platforms may adversely change their policies.

A limited number of games have generated a majority of the company's revenues, and Scopely may be unable to offset any declines in revenues from its top games.

Customer growth and revenue numbers were borrowed from open sources considered to be reliable. However, there is a risk that the actual financial indicators differ from the data from open unofficial sources, which may adversely affect the value of the company's shares.

Financials and Valuation

Scopely has raised a total of $998.5M in funding over 8 rounds. Their latest funding was raised on Oct 28, 2020 from a Series E round at $3.3B valuation. Scopely is funded by 68 investors, including NewView Capital, Battery Ventures, Greycroft, Revolution Growth, Highland Capital Partners and others.

Scopely generates revenue for its free games through advertising and in-app purchases of virtual goods. The company has seen increased user growth and engagement because of COVID. Javier Ferreira, Scopely’s co-CEO, said the company expects to close out 2020 with over $900 million in revenue, up nearly 100% year over year. We estimate that the company will achieve $1.5B annual revenue in 2021 and is currently growing at 50-70%.

According to the 2018 interview with Frank Bono, CTO and CO-Founder of Paragon 28, the company targets annual revenue of $1 billion. The company grew by 63% in 2017, well above the market growth rate. At that time it anticipated 55% growth in 2018 and continued growth in the years to come.

Scopely shares are worth $63 on the secondary market, which suggests a valuation of $3.7B. The company can be compared with Playtika, the mobile games development company from Israel which went public in the beginning of 2021. It is currently trading at 6x LTM sales with a market capitalization of $13B. Scopely’s projected market capitalization, given it maintains the current growth trajectory, will amount to $9-15 billion on the public market. Given the rapid market growth along with financial information about Scopely from open sources, we estimate that return on investment will be over 150%.

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25 Sep
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