Asmodee Group AB (publ)

Welcome to Asmodee Q3 Report 2025-26. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Thomas Kogler and CFO Andrea Gasparini. Please go ahead.

Good morning and welcome to our third quarter result presentation for the fiscal year 2526, where I am very happy to report the strongest sale in EBITDA performance in the history of Asmodee, accompanied by a healthy free cash flow and a solid balance sheet. Looking at games published by partners, sales increased by 50.3% and were driven by successful TCG releases. including Mega Evolution, Phantasmal Flames, the latest Pokemon trading card expansion. TCGs published by Bandai also contributed to sales growth, including the continued success of One Piece and its latest set, Carrying on His Will. The launch of Magic the Gathering, Avatar the Last Airbender this quarter was met with high player demand. And this quarter also saw the successful release of the highly anticipated TCG from the League of Legends universe, Riftbound, with Asmodee acting as a leading distribution partner in Europe. Sales of games published by Asmodee Studios decreased by 12.7% against an exceptionally strong performance in the same quarter last year. The development reflects a combination of factors isolated to the US that Andrea will walk you through in more details. Important to note that games published by Asmodee Studios achieved overall stable performance in Europe. This quarter saw high-profile transmedia announcements. The Werewolves of Midas Hollow unscripted game show is slated to expand to more than 10 new territories through a deal with BunnyJ. Furthermore, together with Netflix, we announced an all-encompassing media partnership on the Catan franchise for upcoming scripted and unscripted content. And after the quarter, we also announced a new transmedia deal with Netflix on our Ticket to Ride franchise. During the quarter, we announced a new strategic licensing agreement between Asmodee and Middle Earth Enterprise under which Asmodee will act as the exclusive category manager for tabletop games based on the Lord of the Rings and the Hobbit franchises. We aim to expand this portfolio even further, including titles published or distributed by third party external to Asmodee. We also attended events such as the International Spiel Gameshow in Essen, where Asmodee has the largest footprint, showcasing our new releases to the show's 220,000 visitors and business partners. Other notable events included Asmodee partnering with the GP Explorer in France, a leading influencer, events that attracted large audiences, and our participation in Italy's leading pop culture event in Luca, the Luca Games and Comics Festival, and our presence in the UK at Alternet. We continue to execute our M&A strategy, actively sourcing new opportunities. During the quarter, we closed the acquisition of the Cthulhu Death May Die IP and games. And after the end of the quarter, we also completed the Bolton acquisition of the Sharing of Nottingham IP that is further strengthening our portfolio of intellectual properties. Moving on to the highlights of the third quarter, where net sales reached above 520 million euros, representing organic year-on-year growth of 25.6%. This was, as I said, mainly driven by the European market, primarily supported by the continued success of trading card games, as just described. The adjusted EBDA grew by 28%, driven by the strong sales growth, and the adjusted EBDA margin increased by 100 basis points to 21.8%, supported by disciplined cost control, bringing our year-to-date margin in line with prior year. The free cash flow was healthy, with free cash conversion at 67%. And our net day on a BDA ratio came in at 1.9 times in line with our medium term target of below two times. During the quarter, we also successfully refinanced our 320 million floating rate bonds, thereby lowering our interest expenses by around 5 million euros annually and strengthening our debt profile. And with these words, I will now hand over to our CFO, Andrea Gasparini.

Thank you, Thomas, and good morning, everyone. Let's now take a look into sales for the third quarter, where net sales reached 524 million, a year-on-year increase of 22.2%. On an organic basis, sales grew by 25.6%. Structural changes relating to the divestment of twin sales interactive had an effect of minus 0.5%. And the impact of changes in exchange rates was minus 3%. Breaking down sales by publisher, reported sales of Asmodee published games decreased by 12.7%. Games published by partners increased by 50.3%. And the other category declined by minus 8.5% impacted by the disposal of twin sales interactive. The strong performance in games published by partners was driven by continued successful TCG releases, as already noted by Thomas, primarily across Pokemon Magic the Gathering and One Piece. As discussed during our Q2 report, there is a timing effect between Q2 and Q3 related to Pokemon Mega Evolution launch of approximately 10 to 15 million, which had a negative impact in Q2 and the corresponding positive impact in Q3. The development in games published by Asmodee is mainly coming from the US due to three factors. First of all, the US market dynamics. The underlying US board game market, as measured by mass market and online sell-out data, remained stable during the quarter. Asmodee's sell-out performance was in line with the market in Q3, following outperformance in Q1 and Q2. Therefore, on a year-to-date basis, Asmodee continues to outperform the market. Quarterly fluctuations reflect a normal volatility in sell-in, which is influenced by retail inventory levels. Second impact is the FX. This is due to the unfavorable UX exchange rate exposure since the beginning of the year. And the third reason is related to Star Wars Unlimited normalization. As you remember, stronger prior year comparison due to the launch of Star Wars Unlimited compared to last year. Now the performance is normalizing as can be expected from this type of product because we are now in the second year of this lifecycle of this TCG. From a category point of view, so the split of sales TCG versus board games, the board games performance was partially mitigated by good dynamics in games published by partners, such as Hitsters from Jumbo Design. Looking at the year-to-date development, net sales reached 1,276,000,000, the year-over-year increase of 24.3%. on an organic basis sales grew by 27% as a result of our diversified product catalog and geographical footprint underpinning another strong sales year. Adjusted EBITDA grew by 28% in the third quarter, reaching 114.5 million compared to 89.3 million last year, paving the way for a year of strong profits. The increase reflected a combination of factors, higher volumes supported by solid sales momentum, disciplined cost management with personnel costs increasing by only 3.5 million due to high activity, well below our top line growth, and the other operating expenses were flat year on year as continued investment in marketing were fully offset by lower other operating expenses. From a profitability point of view, the adjusted EBDA margin increased by 100 basis points to 21.8%, supported by the strong cost control. Note that below the EBDA line, as part of the refinancing, we recorded an impact of minus 5.7 million related to the write-down of implementation costs for the previous bond. with the cost for the new bond of around 5 million being capitalized. So the outcome of the year-to-date performance clearly demonstrated the scalability and efficiency of our business model, able to convert the growth into profit and to reach margin in line with last year, a solid achievement considering the unfavorable sales mix impact observed during the last three to four quarters. Moving on to cash flow, free cash flow after income tax and capitalized lease payment amounted to 76.5 million in the quarter compared to 71.8 last year. This corresponds to a free cash flow conversion of 76% versus 80% a year ago. due to the build-up of strategic inventories and higher tax paid thanks to increasing profits. Looking more closely at the working capital movement, inventories decreased by 55 million in line with seasonality after our high activity period in Q3. In terms of inventory quality, we have bought and still continue to hold the strategic inventory position of distributed TCGs that have turned into sales shortly after the end of Q3, as well as some higher than expected position of long sellers board games that will generate sales in the short to medium term. Overall, the inventory levels remain under strict control with inventory as a percentage of the last 12 months sales going from 17% down to 15.3% year over year. Receivables increased by 45.6 million compared to 39.6 million last year. This is mainly driven by higher sales. Despite this natural increase, the ratio as a percentage of sales improves and this reflects our continued focus on cash collection. On payables, which decreased by 29 million compared to an increase of 2.1 million last year. So last year payables, just as a reminder, were favorable impacted by items affecting comparability related to the listing process of around 20 million. Furthermore, the less favorable movement compared to last year primarily reflected a strong growth in the TCG category, which at current sales level leads to a different cash flow pattern than historically due to standard credit limits. The cash flow from operating activities was also impacted by higher income tax paid of 19 million versus 6.4 last year. This is driven by higher profit before tax last year, which increases the tax payment in the current fiscal year. This explains the majority of the growth. As well as strong activity this year in certain jurisdictions requiring an upward adjustment of current year tax prepayment to avoid unfavorable catch-up effect during the next fiscal year. CAPEX for the quarter of 7.2 million representing 1.4% of sales in line with our CAPEX light business model. So the year-to-date free cash flow after tax and capitalized lease payment is 78 million resulting in a free cash flow conversion of 34%. Our call option to acquire the remaining 45% minority stake in Exploding Kittens was exercised during the quarter. with the closing and cash out expected during the first half of the calendar 2026 year. So to conclude, the strong P&L performance delivered during the third quarter is expected to translate into further cash generation in the fourth quarter in line with the seasonality of the business. Then moving into our healthy balance sheet and capital structure, both leverage ratios before and after M&A commitment are improving and going below two times in line with our medium target medium target thanks to the positive development of both the adjusted EBITDA and the latter reaching 322 million in Q3 compared to 258 million in Q2. I'm also very pleased that during the quarter we successfully refinanced 320 million floating rate bonds extending maturity from 2029 to 2031 and moving to a fixed rate. The refinancing lowers our interest costs by around 5 million per year, improves visibility on future expenses and strengthen our debt maturity profile. In terms of credit rating, during the quarter Fitch and S&P confirmed their WB- rating, while Moody's upgraded to B1 with the positive outlook. In addition, we still have access to the unutilized revolving credit facility of 150 million euros. And with that, I'll hand it back to Thomas.