Enad Global 7 AB (publ)

Good morning and welcome to this Q3 earnings call with EG7. My name is Ludvig Andersson and I will be your moderator during this call. Together with me to present, we have the company's CEO, Yi Han, and Deputy CEO and CFO, Fredrik Ruden. After the presentation, we will have a short Q&A session, so please feel free to email your questions to the company's investor relations email. But now, without any further ado, over to Yi Ji.

Thanks, Ludvig. Good morning. Thank you for joining us. Let's go to the next slide, and we'll start with the key performance figures. Q3 was a solid quarter, had a meaningful rebound from Q2 lows. Net revenues came in at 466 million SAC, and adjusted EBITDA at 102 million SAC. On a sequential basis, a nice rebound. Q2 was the low for the year, while Q2 is typically a seasonal low. This year, more accentuated weakness due to heavier back loaded contents late. As a result, Q2 to Q3 sequential growth was robust. Net revenue increased by 32% and adjusted EBITDA grew by over 200%. Liquidity wise, the group ended the quarter with $219 million in stack of cash with no material debt. Next slide, please. Q3 adjusted EBITDA contribution by business unit was as follows. Games business units led the way with 97 million SEC of adjusted EBITDA contribution represented about 87% of total before holdings costs. Big blue bubbles, My Singing Monsters contributed 42 million ZEC. Decline is expected from the peak levels in 2023. However, a nice growth, 13% sequentially from Q2. Q4 is expected to be near Q2 levels, as Q3 is typically My Singing Monsters peak quarter. Daybreak had a solid quarter, contributing 52 million ZEC, led by Lord of the Rings Online's new content release for the period. EverQuest continues to perform well with this 25th anniversary content. A quieter quarter for Piranha leading up to its new game release, which came out shortly after the quarter, contributing 3 million SEC for the period from its existing game titles. Service segment remains under pressure. 14 million SEC of adjusted EBITDA contribution for the period, representing 13% of total before holdings cost. Fireshine had a nice quarter with their release contributing 16 million SAC. Core Keeper's version 1.0 digital release, which came out on PC as well as all the consoles, was the primary driver for the period for Fireshine. Physical distribution remains a little soft, but expecting a nice rebound next year with the late releases coming to market in 2025. Petrol and Toadman's performance remains lower due to softer market conditions. Petrol was break-even for the quarter, Toadman a loss of 2 million SAC. With the completion of cost cuts, Toadman is operating at break-even now on a run rate basis. Market could remain weak for the next few quarters. During this period, we expect Petrol and Toadman's performance to remain muted. Other notable highlights for the period included successful closing and integration of Singularity VI, completion of Toad and cost reduction, resulting in about $100 million in annual savings, and shortly after the quarter end, MechWarrior Clan successfully released. Next slide, please. Clans released on October 17th across Steam, PlayStation, Xbox, and Game Pass. Solid quality release. Metacritic reached $80, but recently sits at $79. Player reception also quite positive, 77% rating on Steam, and it's trending up towards 80. We're confident of Clans' expected performance over its life. MechWarrior Mercenaries, the prior entry, generated about 300 million SEC of net revenues live today. Expectations for Clans is to do better than that. Should result in a nice return against the 110 million SEC of project investment. However, the initial investment or release window performance was a little softer than expected due to its delayed release. The game came out nine days prior to Call of Duty. As a result, the initial runway for the game's release was shortened. However, with this DLC plans, we expect plans to deliver long tail sales in light with Mercenaries' performance going forward. All in all, a nice first entry for a middle market publishing strategy, a solid quality AA release, a recognized IP-based game with dedicated fan base and more predictable returns as a follow-up entry to a successful existing title. We expect this to generate a nice return for the group going forward. Next up are two major releases in 2025. Singularity 6 is Palia coming to PlayStation and Xbox. and cold iron deep tidal based on the major motion picture IP also on track for the year in 2025. As a result, we do look forward to 2025 being an exciting year for the group. Next over to Frederick.

Yeah, thank you. Next slide, please. So net revenue in Q3 amounted to 466 million, an increase of 113 from previous quarter. Adjusted EBITDA amounted to 102 million, the strongest quarter so far this year. In the comparable Q3 last year, Meisinger Monster was still performing at elevated levels. This quarter, Big Blue Bubble delivered 84 million in net revenue, a reduction by 39 from the 123 in Q3 previous year. Following that the game has stabilized, we judge that it will be easier comparable figures going forward. Over the last 12 months, net revenue amounted to 1,673,000,000 with an adjusted EBITDA margin of 18%. Both these KPIs are expected to improve following our release pipeline over 2025. Next slide, please. We have a foundation of more predictable revenues and cash flows. Combining Daybreak, BigBlueBubble and Piranha, EG7 operates several long life cycle IPs where most are live service games. Net revenue from this portfolio in Q3 amounted to 305 million, corresponding to 65% of net revenue for the group. And over the past 12 months, net revenue amounted to 1,673,000,000, of which 1,108,000,000 derives from the more predictable revenue base. That portion of our revenues has been trending around 66 to 63% over the past five LTM quarters. Next slide, please. Daybreak is the largest contributor to the net revenue and to the more predictable revenue base, generating 212 million in net revenue. This includes 27 million contribution from the newly acquired Singularity 6. But even excluding that acquisition, Daybreak delivers an organic growth. The adjusted EBITDA came in at 52 million, corresponding to the highest margin so far this year of 25%. So a solid quarter for Daybreak. Big Blue Bubble generated 84 million in net revenue and an adjusted EBITDA of 42, which is a 50% adjusted EBITDA margin. And as said, my singing monster has stabilized. And the anniversary campaign in September increased the activity from previous quarter. Next slide, please. So as Yi mentioned, Piranha has been focusing on completing Macquarie Clans for launch in October and has had no other releases during the quarter. Piranha delivered a net revenue of 60 million with a positive margin. Looking at Toadman, an annual 63 million cost savings effort has been executed during the first three quarters. This has affected 100 people previously engaged in Toadman. Toadman generated 9 million in net revenue with a small loss. And there is a restructuring reserve amounted to 70 million accounted for under adjusted EBITDA in the P&L. Next slide, please. Faishan had an active release schedule for the quarter and generated 110 million in net revenue and an adjusted EBITDA of 16. Looking at petrol it's highly dependent on third parties game releases and marketing budgets which continue to be negatively impacted by today's game industry challenges. Petrol generated 35 million in net revenue and stayed on break even due to previously executed cost reductions. Next slide, please. We have accelerated our investment over the past quarters. This quarter, they amounted to 119 million. All those investments are in line with the strategy we communicated one year back. And together, they have the potential to significantly move the needle for us. Q3 investments are 50 million in net effect from the acquisition of Singularity VI. And 45 million is the net investment in various publishing deals, of which Cold Iron is 32. And 21 million is capex for finalizing clones. But even after this investment, we're still at the net cash situation. We had 290 million in cash and no debt. Cash flow from operations was negatively affected by 36 million of accrued revenue in Fiesha, which will be paid to us in Q4. Adjusted for that, operating cash would have been 71 instead of the 35 shown in the cash flow statement. Next slide, please. Thank you. The net revenue over the last 12 months has been trending down due to the decline in My Singing Monster from last year's elevated levels and recorded 1,673,000,000. Given our release pipeline, this is expected to reach around 1.8 billion in the full year 24. And we have lowered our expectation for the full year adjusted EBITDA margin down to 20% based on lower expectations from CLANs following the delayed release from the original plan. We have so far this year seen as many as 13,000 game industry layoffs. indicating a remaining higher risk level in the industry. At the same time, the market is expected to grow CAGR 3% up to 2026. We have, over the past couple of years, prepared our business to be operated more conservatively and sound. This includes backward-leaning measures around cost control and closing down of certain activities, and forward-leaning to add initiatives within the framework of our acceptable risk level. All in all, we are better suited than ever to reach the strategic target to become a leading middle market publisher. So that's all for me. Over to you, Yi. Thanks, Fredrik.